ABSTRACT
This chapter explains the changing American federalism of the past two decades, taking both the intended and the unintended impacts into account. It describes the basic trends in intergovernmental finance over the past twenty-five years and the changes in the interstate variations in these trends. Five dimensions of the interstate variation are considered: the increasing fiscal centralization to the state government level, changes in the rate of revenue mobilization, the declines in federal aid, the determinants of variations in state and local government expenditures, and the changing structure of state and local government revenues and expenditures. A reasonable place to begin is to ask whether the state and local government sector has been growing, both relative to the size of the federal sector and as a component of the US economy. The postwar increase in public expenditures at all levels of government, as well as the shift toward an increasing federal share, has been largely due to social welfare expenditures.
