Iowa’s future hinges on cutting federal dependency
President Donald Trump’s Department of Government Efficiency (DOGE) is not only exposing wasteful spending but also sparking a necessary debate about the size and scope of the federal government. Since President Franklin D. Roosevelt’s New Deal, the growth of the federal government has accelerated unchecked. In the aftermath of the New Deal, former President Herbert Hoover warned against the continual rise of “big government” and the economic dangers of deficit spending, high taxes, and inflation. Hoover once described the federal government as having “the instincts of a vegetable”—constantly spreading and growing.
DOGE is further proof that Hoover was correct. One area that DOGE has exposed is the numerous grants that the federal government provides, which fund an overabundance of programs and nonprofits. Many state and local governments are also the beneficiaries of federal grants.
In Iowa, many critics of DOGE argue that the loss of grant funding will have a substantial impact on the economy and the individuals served by those programs. Surprisingly, few are asking whether it is even constitutional for the federal government to fund all of these programs.
“American political system, first of all, is a system of limited, delegated powers, entrusted to political officers and representatives and leaders for certain well-defined public purposes,” wrote Russell Kirk.
To remind us that the true intent of the Constitution was to limit power, James Madison wrote in Federalist No. 45: “The powers delegated by the proposed Constitution to the federal government are few and defined. Those which remain in the state governments, are numerous and indefinite.”
Madison’s argument was further illustrated within the Constitution through the Tenth Amendment: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
The Constitution in Article 1, Section 8 lists the enumerated powers of Congress, but overtime clauses such as General Welfare, Necessary and Proper, and Commerce clauses have allowed for an expansion of federal power. Now providing federal dollars to support a University of Iowa international writing program is in the “general welfare.”
DOGE is not only projecting sunlight on the federal leviathan, but what the critics do not understand is that states and localities have become dangerously too dependent upon the federal government.
As a consequence of the increase in the size and scope of the federal government, the constitutional principle of federalism has been eroded. Federalism is more than just dollars going from the federal government to state and local governments.
The federal government exerts influence in nearly every policy area.
Federalism is a constitutional principles and it is foundational. The late constitutional scholar James McClellan wrote that federalism was “woven into the entire fabric of the Constitution.” The Electoral College is a product of federalism.
The federal government exerts influence in nearly every policy area. The staggering $36 trillion national debt stands as a symbol of how the federal leviathan has far exceeded the constitutional limits envisioned by the Founders.
The Iowa legislature just finished the 2025 legislative session, and they passed a $9.4 billion budget. In Fiscal Year 2024, Iowa received $13.2 billion in federal funds, which was an increase of $1.4 or 11.9 percent from the pervious fiscal year. Medicaid and education receive the largest percentage of federal funds in Iowa.
Legislators in Iowa, just as in other states, are often limited in how they can legislate because of federal funds and the “guidelines” that accompany those funds. The expansion of the federal government is also an economic threat to the states.
Iowa’s $9.4 billion Fiscal Year 2026 budget represents a 5.3 percent increase over the previous year’s budget, largely because the legislature had to appropriate more funds for Medicaid. Medicaid is a jointly funded program between the federal government and the states. Iowa depends on federal matching funds for programs such as Medicaid, which accounts for nearly $2 billion of the proposed Fiscal Year 2026 budget.
One reason the legislature had to appropriate more for Medicaid is that federal matching funds for COVID are being phased out. In addition, Medicaid expansion has increased costs in Iowa. In Fiscal Year 1990, Medicaid consumed only 7 percent of the budget; by Fiscal Year 2026, it accounts for 19 percent.
The debate over renewing the Tax Cuts and Jobs Act is also making legislators nervous. In order to avoid deficits Congress is considering cutting the Federal Medical Assistance or FMAP rate, which would mean that states would have to increase their share of Medicaid funding if the cuts occur.
Additionally, legislators need to be concerned because if Congress fails to renew the Tax Cuts and Jobs Act it will have an economic impact on the economy, which will impact state revenue. Iowa taxpayers on average can expect a $2,063 per filer tax increase if the TCJA is allowed to expire.
This is why the Iowa legislature needs to be pro-active and not only work at being less dependent upon federal funds but also ensure that its fiscal foundation is secure to soften any national economic emergency.
Governor Reynolds has been trying to limit Iowa’s reliance on federal funds. As a result of President Donald Trump’s DOGE efforts, Gov. Reynolds is advocating that the United States Department of Education allow states greater flexibility in using federal dollars by using block grants. Gov. Reynolds is correct that returning education to the states is not only better policy, but it is the constitutional approach.
Iowa’s fiscal foundation is also secure as a result of conservative budgeting and tax reform. Gov. Reynolds has even combined conservative budgeting and tax reform with the restructuring of Iowa’s government. Through two government reform and reorganization laws, Gov. Reynolds is reducing the size and scope of state government and making it more efficient.
If critics of DOGE think that eliminating federal grants to theaters, work study programs, among others are draconian cuts, what will happen when true austerity comes? It would be better now for policymakers in Iowa to limit spending before any austerity is forced upon them by Uncle Sam. Uncle Sam’s wallet will eventually run out.
This is why legislators must prepare for the potential of federal funds being reduced. It would be better now for policymakers in Iowa to limit spending before any austerity is forced upon them by Uncle Sam. It is imperative that legislators not only have a clear inventory of federal funds but also understand and make transparent the many guidelines and rules that are handed down by federal bureaucracies.
Policymakers in Iowa should also consider reforms such as Utah’s “Financial Ready Utah” plan, which requires the state to have an emergency plan in case the federal government cuts back on federal funds.
This is why federalism is important. It cannot just be reduced to dollars and cents, but Americans need to realize that federalism is a bedrock principle of constitutionalism. Limited government is on life support and if federalism continues to be eroded it will have devastating consequences. Restoring constitutional federalism will lead to better policy outcomes, but more importantly it will restore constitutional government.
John Hendrickson is policy director at Iowans for Tax Relief Foundation.
