Research Says Big Federal Grants to Local Governments Breed Corruption
If you need another reason to hope for success from the Department of Government Efficiency (DOGE)—you probably don’t, but there are plenty to go around—it turns out that efforts by the waste-hunting, government-shrinking (we hope) body may not just save money; it may help make people more honest. That’s because, after decades of increasing flows of federal grants to local governments, there’s strong evidence that the money fuels corruption.
Federal Money and the Surge in Corruption
In a paper published this month, Windfall federal grants and local government corruption, authors Xiangpei Chen (an assistant professor of accounting at Loyola University Chicago) and Angela K. Gore, Jennifer Spencer, and James Wade (all of George Washington University) note that federal grants to local governments increased from $135 billion to $1.2 trillion between 1990 and 2022. The money came from 1,670 federal programs, prompting concern from agencies including the Office of Management and Budget (OMB) and the Government Accountability Office (GAO).
“Long-standing concerns remain about the federal government’s grants management and the lack of effective oversight tools to reasonably assure that grants are used for their intended purposes and that risks of fraud, waste, and abuse are minimized,” the GAO warned in 2011.
With all that money in the wind, the authors of the windfall grants paper looked at local government recipients of grants to see if there is anything to support such worries. Their answer is a big yes.
“We begin by examining whether federal grant windfalls are associated with more local corruption, and find significantly positive relations between windfalls and the number of public sector employees charged with corruption in the subsequent two years,” write the researchers. “The economic magnitude is significant, with the presence of a windfall associated with a 28% increase in public officials charged.”
For the purposes of the st
Article from Reason.com
The Reason Magazine website is a go-to destination for libertarians seeking cogent analysis, investigative reporting, and thought-provoking commentary. Championing the principles of individual freedom, limited government, and free markets, the site offers a diverse range of articles, videos, and podcasts that challenge conventional wisdom and advocate for libertarian solutions. Whether you’re interested in politics, culture, or technology, Reason provides a unique lens that prioritizes liberty and rational discourse. It’s an essential resource for those who value critical thinking and nuanced debate in the pursuit of a freer society.
