A recent Congressional Research Service (CRS) report highlights the incredible growth in grants-in-aid programs over the past century. Basically, the federal government collects tax receipts from residents of the states and territories, and then Congress and the bureaucracies in the Executive branch dole a good chunk of that money back to state and local governments. The amount redistributed will reach $645 billion in FY 2011 (4.2 percent of GDP), a slight drop from the previous year because of the "stimulus" program, but is up from $286 billion in 2000 (2.9 percent of GDP).
This growing dependency on a centralized government does not bode well for our federal system as a laboratory of democracy. The federal government can use its power of the purse to coerce states to implement uniform policies which diminishes the ability of decision makers to experiment with different options suited to local needs (unless of course they successfully petition Washington, DC, for special exemptions, which isn’t exactly the model our Founders set out to establish).
Just how many grants-in-aid programs are there? CRS reports that a definitive count has not been done in several years, and in the past, different federal entities have come up with different numbers depending on the methodology they used. CRS took a look at the Catalog of Federal Domestic Assistance (CFDA), a list of federal grants, and counted 1,132 programs that state governments, local governments, U.S. territories, and/or federally recognized tribal governments are eligible to apply for. Of these, 93 are not currently funded and 86 were excluded from the count because they are available to both public and private institutions. This leaves 953 grants-in-aid programs.
Beyond these, there are even more programs the federal government provides. Chris Edwards of the CATO Institute counted 1,804 subsidy programs in 2008 (this figure includes the programs that were listed in the CFDA that year).