In 1960 the Federal Government had 132 categorical grant programs, costing $7 billion.  When I took office, there were approximately 500, costing nearly a hundred billion dollars—­13 programs for energy, 36 for pollution control, 66 for social services, 90 for education.  And here in the Congress, it takes at least 166 committees just to try to keep track of them.

You know and I know that neither the President nor the Congress can properly oversee this jungle of grants-in-aid; indeed, the growth of these grants has led to the distortion in the vital functions of government.  As one Democratic Governor put it recently:  The National Government should be worrying about “arms control, not potholes.”

The growth in these Federal programs has—­in the words of one intergovernmental commission—­made the Federal Government “more pervasive, more intrusive, more unmanageable, more ineffective and costly, and above all, more (un) accountable.”  Let’s solve this problem with a single, bold stroke:  the return of some $47 billion in Federal programs to State and local government, together with the means to finance them and a transition period of nearly 10 years to avoid unnecessary disruption.

I will shortly send this Congress a message describing this program.  I want to emphasize, however, that its full details will have been worked out only after close consultation with congressional, State, and local officials.

Starting in fiscal 1984, the Federal Government will assume full responsibility for the cost of the rapidly growing Medicaid program to go along with its existing responsibility for Medicare.  As part of a financially equal swap, the States will simultaneously take full responsibility for Aid to Families with Dependent Children and food stamps.  This will make welfare less costly and more responsive to genuine need, because it’ll be designed and administered closer to the grass roots and the people it serves.

In 1984 the Federal Government will apply the full proceeds from certain excise taxes to a grass roots trust fund that will belong in fair shares to the 50 States.  The total amount flowing into this fund will be $28 billion a year.  Over the next 4 years the States can use this money in either of two ways.  If they want to continue receiving Federal grants in such areas as transportation, education, and social services, they can use their trust fund money to pay for the grants.  Or to the extent they choose to forgo the Federal grant programs, they can use their trust fund money on their own for those or other purposes.  There will be a mandatory pass-through of part of these funds to local governments.

By 1988 the States will be in complete control of over 40 Federal grant programs.  The trust fund will start to phase out, eventually to disappear, and the excise taxes will be turned over to the States.  They can then preserve, lower, or raise taxes on their own and fund and manage these programs as they see fit.