The cities of Troy and Brundidge are each applying for grants from the U.S. Department of Transportation to build sidewalks. Apparently now even building sidewalks is a Federal matter. This a prescription for wasteful public spending.

Before continuing, I first want to emphasize that I am not criticizing city officials for pursuing these grants. The nearly $2 billion appropriated by Congress over the next two years to the Transportation Alternatives Program will be spent somewhere in the country. Sidewalks are worthwhile, and building closer links between Troy University and downtown Troy is a good idea. Local officials are prudently seeking available Federal dollars and I hope their applications are successful.

Yet this is a bad game for the nation. Such a Federal program violates fiscal federalism, the principle of assigning tasks to levels of government based on the scope or breadth of the benefits. Government provides many public goods and services, with some benefiting the entire nation and others just a local community or neighborhood. Fiscal federalism argues that goods and services should be assigned to the level of government coinciding with the scope of the benefits. Thus the national government should direct activities benefiting the nation, like national defense, while cities should provide local public services.

Goods and services should only be provided when they provide benefits in excess of the cost. The democratic process does not tally up benefits and costs perfectly, with politically influential people and groups tending to count more. But if the benefits are local, better decisions result if the local community pays the full cost and calls the shots. Residents of Troy are in the best position to assess if benefits of a city service exceed the cost.

Building sidewalks then should not be a federal matter. The benefits are local, but if the grants are received, our communities will only pay 20% of the costs. Troy’s sidewalk proposal would cost $500,000, and so the city would have to pay only $100,000. The project is worth doing with federal funding as long as it provides at least $100,000 in benefits to our community. Federal funding creates the conditions under which resources are more likely to be wasted.

Federal funding also inflates the cost of projects. Troy proposes to build sidewalks using paving stones, which no doubt will look very nice. And cost more than concrete. Is the beautification worth the extra cost? Certainly, if Washington pays the extra. Such gold plating of services is another form of waste due to Federal funding.

Federal involvement in local matters also results in delay. The Troy and Brundidge sidewalk projects seem destined to be undertaken only if bureaucrats in Washington think they are worthwhile. Government functions better if local governments fund and make decisions on local matters on their own.

Federal funding appears great when a local community gets something at a fraction of the cost. But less than $2 billion in TAP funds are available, so the Troy and Brundidge proposals probably face long odds. Even if our sidewalks get built, our tax dollars will be paying for hundreds of similar projects across the nation, and that is just with this one federal program. Federal funding for local goods and services is how the nation ends up building bridges to nowhere.

Ultimately we all lose through federalizing local government. Politicians in Washington do not create the wealth which the Federal government taxes. The money the DOT doles out to cities and states in grants like this is ultimately our money. Circulating tax dollars through Washington and back to states and cities does not magically increase the amount of money available. In fact, states in total get back less money than we pay because Federal bureaucrats must be paid. In exchange we get a system where city officials have to get approval from Washington bureaucrats to build sidewalks.

Incentives shape behavior, and Federal funding creates a poor system of incentives. Devolving taxes and decision making authority to states and cities will result in more responsive and efficient government.

Daniel Sutter is the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University.