Economic Considerations and Reagan's New Federalism Swap Proposals

Upon coming to office, President Ronald Reagan proposed a numberof programs collectively referred to as the New Federalism.These programs were designed to alleviate some of the problemswhich the president saw as plaguing the intergovernmental systemand to accomplish Reagan's goal of decentralizing authority.One of the most highly publicized and debated— indeed,probably the most controversial—aspect of the President'sNew Federalism package was the "Big Swap" plan. Both versionsof this plan, however, were bad deals for the states and theircommunities, and it would appear that several interrelated economicconcerns played a role in the opposition of many state and localofficials to these proposals. To demonstrate just how bad theseproposals were, the article documents the effect that inflationand recession had had on the fiscal health of state and localgovernments, and the projected impact that these plans wouldhave had on state and local revenue and tax systems.