Below is an excerpt from a video conference with Michael Greve, Reihan Salam, and me on the problems with fiscal federalism in practice. The full half-hour video is here. And, yes, I also created a podcast.
It is a good discussion, but quite depressing. A naive view of federalism is that it encourages robust competition at the state and local level. Unfortunately, the reality is that competition gets suppressed, and the incentives are rigged in favor of government expansion.