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Abstract

Current proposals would convert many domestic assistance programs into Federal block grants to be administered by State governments. Block grants give States broad discretion on how Federal funds are spent. In theory, this can lead to program improvements, reduced administration costs, and lower Federal deficits. Research on past block grants, however, indicates that block grants have had mixed success in achieving these goals. Block grants can also create inefficiencies and overlook national objectives, such as assisting poor communities. Whether or not block grants are adopted, rural communities will fare better if aid formulas and delivery systems account for rural-urban differences.

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