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Wednesday, November 1, 2000

The Economic Virtues of Federalism

COPS Squanders Society's Resources

Dan Alban is a recent graduate of Berry College and a fellow at the Institute for Humane Studies. Frank Stephenson is an assistant professor of economics in the college’s Campbell School of Business and an adjunct scholar with the Georgia Public Policy Foundation.

The political benefits of federalism as a mechanism for dispersing and restraining governmental power are well understood by students of public policy. Often overlooked, however, are the economic benefits.

Take the federal government’s Community Oriented Policing Services (COPS) program. The COPS program has been the subject of much criticism since its inception in 1994. This criticism, recently repeated in a front-page Wall Street Journal story, usually focuses on the questionable claim that the program will add 100,000 new officers to the streets and the dubious proposition that communities will retain the newly created police positions as the federal government phases out its financial support. The efficacy of the program is indeed questionable, but the quibbling over the precise number of police officers added by COPS ignores the fundamental issue of whether the program should have been created in the first place. Critics seem to have overlooked the fact that COPS misallocates scarce resources that communities or individuals could have put to more highly valued uses.

Traditionally, municipal policing has been a local issue, with state and federal assistance limited to purposes such as capturing criminals in interjurisdictional flight and specialized forensics, like DNA testing. That is, policing is primarily the domain of city and county officials who levy local taxes to finance it. Placing the responsibility for local policing on local officials is sensible because they are more aware of crime conditions than state or federal officials and are better able to judge their constituents’ willingness to pay for additional police protection. Local officials have an incentive to compare the improvement in community safety from additional officers to the cost of financing them through local taxes.

Hence, federalism, by providing for a division of labor among different levels of government, serves to enhance economic efficiency because local officials have better knowledge of their constituents’ willingness to pay for policing or other services than do state or federal officials.

COPS, however, weakens the link between hiring additional officers and local willingness to levy taxes to pay for them. A community’s cost of hiring an additional police officer is greatly reduced because three-fourths of the program is funded from federal revenues. Consequently, even if a community has what it considers to be an adequate police force, COPS induces it to hire an additional officer at only one-fourth the usual cost. It is a bitter irony that this affront to federalism, which moves Congress yet another step closer to becoming, in the words of Bloomington, Minnesota, police chief Bob Lutz, “the gigantic city council of the United States,” is foisted on the public under the name “Community Oriented Policing Services.”

Since no community solves or prevents all its crimes, communities might benefit from obtaining the additional police officer since that officer might deter or solve crimes that otherwise would have occurred or gone unsolved. This, however, does not mean that the benefit of the additional officer outweighs his cost. Since the community does not bear the full cost of the officer, it may add an officer to handle low-priority items like jaywalking and traffic enforcement. This results in the misallocation of society’s resources: Local officials choose not to hire an officer if they must pay his entire salary and expenses, but they do hire the officer when they have to pay only 25 percent of his cost. Since communities bear such a small share of the cost of an officer, even an officer assigned to low-priority duties might be considered worthwhile by local officials.

Consider Floyd County, Georgia, the home of Berry College. Floyd County has nine federally funded officers and receives a grant in excess of $600,000 over three years. While these officers have undoubtedly captured some real criminals and deterred other would-be criminals, the Floyd County “C.O.P.S. Unit 1998 Annual Report” touts the following accomplishments:

  • Conducted 37 training programs in local schools, contacting 3,515 students.
  • Participated in eight church events involving 128 people and providing security for a crusade held at the local civic center.
  • Assisted 11 local charity events for, among others, the Special Olympics and Muscular Dystrophy Association.
  • Sponsored a youth baseball team, the “Bullets.” (This politically incorrect name must drive gun-control advocates nuts.)
  • Established the Floyd County Police Youth Boxing League.

Local citizens might consider these worthwhile, perhaps even high-priority, policing activities. But if that’s the case, then the local officials should have ample political support for locally funding the additional officers.

Can’t Raise Taxes?

This reveals another possible argument for federal funding of local police: Local communities need additional police officers, but for some reason local officials are either politically unable to raise taxes to fund such officers or too ignorant to realize that the benefit of additional officers would outweigh their expense. Putting aside the rank paternalism present in this line of reasoning, it is apparent that this contention is false. Local officials, at least those in Floyd County, have not seemed constrained in raising taxes to pay for questionable things such as subsidizing a hotel construction project or building a municipal golf course. It strains credulity, especially given the public’s near hysteria about crime in recent years, to believe that local officials are politically able to raise taxes for such projects but are unable to pay for local policing.

Rather than alleviating a dearth of police officers, COPS causes local police departments to proclaim how desperately “underfunded” they are, thereby creating an artificially high demand for police officers. That local requests for COPS grants exceeded available funds, as COPS Director Joseph Brann boasted in a 1997 letter to the General Accounting Office, does nothing to prove that local communities are somehow politically constrained from directly funding community policing. It simply indicates—no surprise here—that communities will queue up to receive free money from Uncle Sam.

While some local officials would no doubt argue that they are just trying to get back what their communities paid in federal taxes, this argument is specious because if all communities got back what they paid in federal taxes there would be no point in sending the funds to Washington in the first place. And since the contention that communities are only getting back what they paid disregards the bureaucratic overhead and the stipulations requiring communities to use the grants to hire unnecessary police officers, it overlooks the real means by which COPS squanders society’s resources.

  • Frank Stephenson is a professor of economics at Berry College in Rome, Georgia.  He holds a B.A. from Washington and Lee University and a Ph.D. from North Carolina State University.  His research interests lie primarily in public choice and sports economics, and he has published in scholarly journals such as Public Finance Review, Public Choice, the International Journal of Sport Finance, and the Journal Sports Economics.  He has also contributed to Regulation and The Freeman and has taught at IHS and FEE summer seminars.