Brian Galle (Boston College)
presents Does Federal Spending “Coerce” States?
Evidence from State Budgets at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series hosted by Ben Alarie:

According to a recent plurality of the U.S. Supreme Court, the danger
that federal taxes will “crowd out” state revenues justifies aggressive
judicial limits on the conditions attached to federal spending. Economic
theory offers a number of reasons to believe the opposite: federal
revenue increases may also float state boats. To test these competing
claims, I examine for the first time the relationship between total
federal revenues and state revenues. I find that, contra the NFIB
plurality, increases in federal revenue — controlling, of course, for
economic performance and other factors — are associated with a large
and statistically significant increase in state revenues. This version
of the study additionally provides extensive background explanations of
underlying economic concepts for readers unfamiliar with the prior
public finance literature.