The right way for America’s states to use federal largesse

NEARLY A YEAR has passed since Congress approved the American Rescue Plan Act (ARPA), promising spending of $1.9trn, equivalent to 9% of GDP. Many, including this newspaper, worried that such federal largesse looked excessive. Those fears have been borne out. ARPA helped create a surge of demand that contributed to the inflation that is plaguing America and which is higher than in other advanced economies. It also gave states and local-government agencies over $650bn—more than they knew what to do with.

They are keen to spend it, one way or another. Outgoings from the states reached an all-time high in 2021, and will probably break the record again this year. Some ARPA money is going on sensible investments and into rainy-day funds that will help states weather the next recession. But too many states are lavishing federal dollars on dodgy projects that look better in a campaign ad than on a balance-sheet.

State legislators in Massachusetts are fond of diverting money intended to help schools reopen towards building new football pitches instead. More worrying are the efforts to enact new tax cuts and social programmes. Iowa plans to ditch a progressive income tax in favour...