Intergovernmental Relations in the Reagan Era

Abstract

This article reviews federal Reagan‐era policies that affected grant‐in‐aid programs to state and local governments. We find the most important developments in federal aid policies of the Reagan years are twofold—the relative decline in the national government’s involvement in domestic affairs and the concomitant rise in the role of the states. The administration achieved these effects by devolving federal authority to states and by reducing grant spending. Reagan’s biggest cuts in federal aid outlays came in 1981; in subsequent years, total grant outlays began to rebound, increasing in nominal dollars to levels above those in the Carter years, though still below the high‐water mark reached in 1978 in real terms. Medicaid, the largest federal aid program, accounts for most of the overall growth, masking cuts in operating and capital grant programs. Reagan’s devolutionary and retrenchment policies are one of several factors we see as contributing to the rising role of states in domestic affairs, a trend we think is likely to continue in the next administration.