So failed states become a drain on everyone & at the same time the most economically challenged within the state pay the brunt of that failure as they cant move.
No they aren't. A failing state doesn't look like Mad Max, it looks like Michigan or West Virginia or Mississippi. The federal government has no constitutional obligation to bail them out.
> So failed states become a drain on everyone & at the same time the most economically challenged within the state pay the brunt of that failure as they cant move.
The risk of failure is the price of success. Either states make their own decisions and take their own lumps, or we have some Borg Collective mandatory national conformity to complex corruption-informed uniform regulations with 2000% bureaucratic overhead.
Example: https://slatestarcodex.com/2017/08/29/my-irb-nightmare/
Michigan actually does not look bad on a wide range of metrics. It's unemployment rate is right at the national average and it get about as much money from the federal government as it gives back. People pay attention to it because it's close to average not because it's failing.
EX: "Michigan's poverty rate dropped 0.4 percentage points to 15.8 percent last year but the nation saw a bigger drop of 0.8 percentage points to 14.7 percent."
And wealth transfers from richer states to poorer ones are the inevitable (indeed intended) consequence of federal income redistribution. They're a problem if they're disproportionate, i.e. two states are equally poor but one gets more money because it somehow has undue political power. Obvious example is Florida. Other than that it's no different than redistribution from richer people in California to poorer people in California, except that they happen to be in different states.
Another problem is the state-level consequences of some of the income cliffs the feds have in place, i.e. six independent subsidies phase out at the same time with higher income.
The states need the incentive to improve. Increasing average income by $4 shouldn't cause the feds to take away $5 from the state.
But if that happens, the cause is flawed federal policy, not state-level diversity.
This is a wealth transfer to failing states to prevent complete collapse or an a massive exodus of the population.
Because a bail out is normally a cliff and cliffs are moral hazards.
Suppose Level 10 is great, Level 5 is mediocre and Level 1 is a disaster. Now suppose that there is a federal policy that says if anybody gets down to Level 1, we shower them with money until they get up to Level 5. What incentive does this create for a state currently at Level 3?
Compare this to something like a $12,000/year federal UBI with a 30% flat tax rate. In that case an unemployed person gets $12,000 and someone with a $20,000/year job gets $26,000 ($12,000 + 0.7*$20,000), which is obviously better than just $12,000. Moreover, the UBI is unconditional regardless of which state you live in, so if your state is terrible, the level of assistance isn't conditional on you continuing to live somewhere unsustainable.
> This is a wealth transfer to failing states to prevent complete collapse or an a massive exodus of the population.
But that's what's supposed to happen. WV has negative population growth. There is nothing wrong with that. It doesn't need to be stopped. It's completely natural for unsustainable places to be abandoned.
Places aren't people. There is no need to save them through external intervention.