Federal "shift and shaft"

WASHINGTON — Official Washington is getting ready to throw America's states and cities a dangerous hardball in President Bush's second term.

Across a broad array of issues — homeland security, health care, the environment, education, taxes — the president and Congress appear quite willing to override state choice and preference.

Firmly in control of the federal government, the Republican Party that once made a big cause of state and local autonomy, arguing government closest to the people is always best, promising to control unfunded federal mandates in its famed 1994 "Contract with America," appears ready to champion and assert federal power at almost every turn.

Few of his fellow U.S. senators, laments Lamar Alexander, a former Tennessee governor and presidential contender, "respect the prerogatives of governors and mayors to make their own decisions." Today's conservatives, Alexander told Governing magazine's Alan Greenblatt, "are just as bad as liberals at passing new programs and expecting someone else to pay for it."

Exhibit No. 1 is the No Child Left Behind Act, with its raft of penalties that local school districts must face if students fail to measure up on federally mandated, standardized tests. Washington's promised payments are already $25 billion short. Whatever happened to the old battle cry, "local control of education"?

The pattern extends to business regulation — Congress heeding corporate calls to restrain state regulation (a ban on state or local taxation of the multibillion-dollar Internet industry's sales, for example). The Washington-based coercion is crystal clear on the social front, as the administration goes out of its way to quash state efforts to experiment on such fronts as assisted suicide and legalizing marijuana for medical use.

Just as alarming for state and local governments, a historic fiscal "shift and shaft" is gathering momentum. Obliged to cope with gargantuan federal deficits triggered by deep tax cuts and Iraq war outlays, Congress and the White House are almost sure to target the flow of federal program assistance — roughly $400 billion yearly — that still flows to states and localities.

About 45 percent of the now-imperiled federal aid flow is for Medicaid, the fast-inflating, shared federal-state program that's passing state outlays for schools and undermining the fiscal stability of states coast-to-coast. The administration has sought to turn Medicaid into a block grant and then pare it down.

If today's outlook is bleak for states, it's even worse for cities. The administration will be recommending deep cuts in community development block grants and Section 8 housing rental assistance, plus the Hope VI housing projects it has previously sought to abolish.

The gathering storm is sure to intensify with shifts in the federal tax code to promote private savings and Bush's "ownership society" agenda — an agenda that could even include, fiscal expert John Petersen predicts, terminating the deductibility of state and local taxes.

Such a hit, saving the federal government $45 billion in deductions yearly, would presumably hurt most states to whom the administration owes little — such big "blue" bastions as New York, California and Massachusetts, with their relatively high income taxes. But it would likely make it harder to raise or maintain state and local taxes everywhere, seeming to justify critics who've claimed that a dramatic rollback of domestic government programs has been the new Republican conservatives' agenda all along.

Liberals have been declaring there's now a golden opportunity to enact groundbreaking new laws at the state level. Top issues being expressed by progressive state legislators, says Tim McFeeley of the Center for Policy Alternatives, run from minimum-wage hikes to requiring police to tape interrogations for serious crimes, California-style "clean cars" air-emission requirements, to requiring utilities to ease up on greenhouse emissions through more renewable power generation.

The irony, of course, is the big turnaround — liberals trying to innovate through states' rights, conservatives pushing their agendas through federal power. The dilemma for the "new" states' rights crowd is that the national government's fiscal pain is so intense it's sure to ricochet through the federal system, squeezing budgets and often strangling state and local innovation.

And that in itself could be a real national tragedy. For all of the states' shortcomings, they've historically produced important programs and directions for the entire nation — most recently with welfare reform in the '90s. The whole country has a stake in preserving the states' fiscal and political viability, no matter what party or ideology is in power nationally.

Neal Peirce's column appears alternate Mondays on editorial pages of The Times. His e-mail address is nrp@citistates.com