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The Agenda

NRO’s domestic-policy blog, by Reihan Salam.

The Worst Way to Decentralize



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Stephan Faris’s recent Bloomberg Businessweek article on Sicily is an invaluable portrait of a particularly dysfunctional brand of federalism:

Since 1946 the island has enjoyed the official status of an autonomous region, with its own parliament and laws. In most cases elsewhere, self-determination encourages responsibility. In Sicily, the effect has been the opposite. The island’s residents pay the bulk of their taxes to the central government in Rome, which then funnels money back to the region to spend. “The citizen has the perception that what was taken was taken by Rome,” says Francesco Piro, who served as the region’s budget minister in the 1990s. “But what gets given is given by the region.”

As a result, Sicily’s politicians became dispensers of benevolence, handing out jobs and favors, with little incentive to worry about waste. “The politician sees the need and says, ‘I’m going to create a job for you,’ ” says Enrico Del Mercato, co-author of Dead Weight: Waste and Privileges in the Free State of Sicily. “And from that moment begins your relationship of dependence on the politician.” Meanwhile, every reform that gets pushed through the national Parliament in Rome has to be passed once again—often months, if not years, later—in the regional capital, Palermo.

All governments get called upon to tackle unemployment. In Sicily, the solution was to create jobs by fiat. The regional government directly employs some 18,000 workers, five times as many as the region of Lombardy, around Milan, which has twice Sicily’s population. 

Faris’s article reminds me of Michael Greve’s critique of “intergovernmentalism” in “Constitutional Moments“:

Another deleterious effect of intergovernmentalism is to produce fiscal illusions and, in short order, a much bigger government. Because the federal government pays between 50 and 80 percent of state Medicaid expenses, those services look very cheap to a state’s citizens, so they demand more of them. Each state will expand the services to maximize federal dollars. Along the way, Medicaid crowds out other, non-funded programs. When a fiscal crisis hits, Medicaid can no longer be cut, because that would mean leaving federal money on the table. And states cannot opt out, because their citizens would pay the federal taxes for the program in any event. All the states can do is what their voters ask them to do: demand yet more favorable terms. The institutional arrangements drive the demand for government.

To put this another way, we’re all Sicilians now. 



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