Matt Yglesias makes sense when he writes:
If you “cap” federal spending, then Congress will just spend more time dreaming up ways to semi-coerce state government into spending more money. If we’re trying to ask what kind of tax burden the country can afford overall, we need to look at the whole picture.
This is why I feel so strongly about a comprehensive competitive federalism agenda: ending the state and local tax deduction, transforming Medicaid into a block grant, and allowing states to take advances against future cash transfers to deal with lean periods in a responsible fashion. Passing the buck isn’t a solution, but giving the states the autonomy and the tools they need is a necessary part of one.