Tougher federal spending caps are needed, but sadly any new restraints would probably be undermined by the twin fiscal evils of Keynesianism and autopilot entitlements.

Fortunately, there is another way to avert fiscal disaster: phase out $1.3 trillion a year in federal subsidies for state and local activities such as K–12 education, low-income housing, welfare, urban transit, and Medicaid. Devolving funding for state and local activities would slash federal deficits and stabilize the debt.

As the federal government cut subsidies, the states could downsize programs or they could fill the funding void with their own resources. In the latter case, the states would do so with current revenues — not debt — because they have extensive constitutional, statutory, and economic restraints limiting debt issuance.

[There are other reasons, more acute and compelling, to end the federal subsidies for higher education. That may not bring a solution on its own to soaring federal debt, but it would have a huge impact on personal debt by ending student loans and forcing colleges to assess tuition — and its pedagogy — in a market with full price signaling. — Ed]