Viewing Devolution With Alarm.

• Author: Snell, Ronald K.
• Position: Review

Hazardous Crosscurrents: Confronting Inequality in an Era of Devolution by John D. Donahue. The Century Foundation Press, New York, N.Y., 1999. 84 pages, paperback, $10.95.

Can the States Afford Devolution? The Fiscal Implications of Shifting Federal Responsibilities to State and Local Governments by Harold A. Hovey. The Century Foundation Press, New York, 1999. 78 pages, paperback, $10.95.

These two short and readable books from the Century Foundation's series The Devolution Revolution examine some of the social and fiscal implications of the devolution of federal responsibilities to state governments.

Donahue is an associate professor of public policy at the John F. Kennedy School and a former assistant secretary in the Labor Department in the Clinton administration.

He focuses on the growing economic inequality in American society and contends that the long-term impact of devolution will, at best, not move American society toward equality and will, at worst, increase inequality and weaken the American middle class.

Hovey, a well-known authority on state and local finance and policy, contends that fiscal devolution is likely to decrease spending on programs that are devolved to the states, increase disparities among the states, and result in greater fiscal pressure on state and local governments.

Donahue says that in the 1980s and 1990s, the share of personal income going to the top 20 percent of families in the United States has reached levels not seen since the 1920s, that the share going to the poorest 20 percent has remained constant, and that the 60 percent of earners in the middle have been squeezed. He moves quickly over the reasons for the growth in inequality to focus on the way decentralization of power in the United States will affect inequality. He sees a number of reasons for concern:

* Tax competition moves states further toward regressive tax policies that make inequality worse.

* Although state policy so far under welfare reform has been to spend more per recipient, in a recession states are likely to reverse that trend for fear of becoming "welfare magnets."

* The weakness of organized labor has made it unnecessary for additional states to enact measures Donahue labels as anti-labor--like right-to-work laws--but interstate competition for economic development could lead to a resurgence of antilabor legislation.

* Restrictions on the amounts and availability of unemployment compensation will increase with devolution.

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