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Publius: The Journal of Federalism 1998 28(1):23-48;
© 1998 by CSF Associates Inc.
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Implications of the Balanced Budget Act of 1997 for the "Devolution Revolution"

Robert Tannenwald
Federal Reserve Bank Boston

From an economist's perspective, the fiscal and administrative goals of the so-called "devolution revolution" include less federal intergovernmental aid, especially if fiscally equalizing; the substitution of block grants for matching grants; greater administrative flexibility for the states; and fewer underfunded mandates. This article uses these devolulionary yardsticks to analyze the major provisions of the federal Balanced Budget Act of 1997. These provisions fall far short of a "devolution revolution." The act increases the level of federal assistance, leaves Medicaid as an open-ended entitlement, and preserves a strong role for the federal government in shaping intergovernmental grants. The article discusses the political forces moderating the act's devolutionary impact.


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