Santanu Chatterjee
Santanu Chatterjee

Santanu Chatterjee, head of the Full-Time MBA Program and associate professor of economics, was featured in WalletHub’s recent study examining the states that are most- and least-dependent on the federal government.

His interview is featured below:

WH: What makes states more or less dependent on Federal dollars? Is this good or bad? 

Chatterjee: States depend on the federal government in a variety of ways, which include funding for infrastructure, education, healthcare, unemployment insurance, etc. In fact, most aspects of our daily lives include an array of "public goods" provided by both the state and federal governments. 

The need to balance state-level budgets at the end of each fiscal year creates incentives for state legislatures to depend more heavily on federal dollars to help close their books. This is especially binding in difficult economic times, when state and local tax revenues (sales, income, property, etc.) are on the decline. 

State dependence on federal dollars for important public services and goods is inevitable in a democracy. However, any lack of oversight or proper evaluation of need, costs and benefits may lead to a significant wastage of federal resources. 

WH: What programs should be a state/local responsibility and what should be a federal responsibility? 

Chatterjee: In a market-oriented society it is difficult to completely decouple government programs and services, since there are often overlaps in how states and the federal government interact with private citizens. But perhaps infrastructure, education and healthcare are three areas where the federal government can play an important role, since investments in these areas have both national and global consequences. 

WH: What measures should be undertaken in order to ensure a fair redistribution of federal resources? 

Chatterjee: It is important that federal resources be disbursed with an eye to creating an "equality of opportunity" for all. One of the most pressing challenges of our times is stagnating income growth, especially for the middle class. This can and does have significant effects on economic growth and income inequality. Critical investments in infrastructure, affordable healthcare and education, and comprehensive immigration and tax reform are some of the key areas through which federal resources can help ensure that we promote both efficiency and equity in our society.