ABSTRACT
This chapter examines the flow of federal assistance and other payments to states and localities and the individuals living there. It deals with federal assistance to states and localities. The chapter describes the large budget flows outside assistance; this includes the billions in federal procurement, and in such direct flows as retirement and disability payments. The new Washington administration sparked heated debate over its proposal that the federal government assume the debts that states had accumulated during the Revolutionary War. The growth of federal assistance programs for state and local governments, and payments to individuals and corporations, have dramatically altered both the kind of federal system we have and the debates surrounding how to move it forward. The relationship of the federal government to states and localities is defined by many laws, but especially by money and the conditions placed on that money.
