Should the Federal Government Reallocate Funds within Federal Transfers?

• Published in: Public finance review Vol. 37; no. 5; pp. 596 - 612
• Main Authors: Neves Sequeira, Tiago, Ferreira-Lopes, Alexandra
• Format: Journal Article
• Language: English
• Published: Los Angeles, CA SAGE Publications 01-09-2009; SAGE PUBLICATIONS, INC
• Subjects: Business cycles; Direct payments; Disability; Economic models; Federal government; Financial management; Fiscal federalism; Fiscal policy; Generalized method of moments; Grants; Leverage; Longitudinal studies; Panel data; Payments; Purchasing; Retirement; U.S.A; Wages & salaries; components of federal transfers; business cycles; panel data; GMM
• ISSN: 1091-1421; 1552-7530
• DOI: 10.1177/1091142109343806

It is recognized that one of the goals of federal transfers is to provide the states with some financial leverage during recessions. Federal transfers in the United States comprise such components as retirement and disability payments for individuals, other direct payments for individuals or organizations, grants, procurement contracts, and salaries and wages. Is the composition of the federal transfers’ budget having an optimal effect on the business cycle or should the federal government reallocate some expenditure? In this article, we argue that the federal government may improve its role in stabilizing the business cycle if some reallocation is made from procurement contracts and payments for other than individuals to direct payments for individuals, grants, and disability and retirement payments.