Fiscal Federalism, ARPA, and the Politics of Repair

Abstract

The American Rescue Plan Act (ARPA) represents a politics of repair for American Federalism. The unprecedented size, scope, and timeliness of ARPA enable local governments to address some of the structural inequities laid bare by the pandemic. U.S. Federalism was broken before the pandemic, with states exerting a triangle of pressures that created a tightening vice on local government through revenue restrictions, downloading expenditure responsibilities, and restricting local policy authority. Recent federal action through ARPA has helped ease the pressure on local revenue, enabling new expenditures and new policy action. ARPA is larger, longer, and more expansive than the American Rescue and Recovery Act passed after the Great Recession. We analyze revenue and expenditure data for all local governments and special districts from 2000 through 2022. ARPA represents a layer in the palimpsest of federalist policy, a politics of repair, that reminds us that more cooperative federal-local relations are possible.