The Reagan administration reduced federal spending on urban and regional development just when the American economy experienced massive restructuring. Federal withdrawals, however, rather than simply reducing governmental intervention in markets, produced a shift of action to the state and municipal level. The impact of restructuring caused state and local governments, often under pressure from business, to create a de facto national economic development policy. Governments fiercely competed with one another in a system of subnational mercantilism, the net effect of which probably was to reduce taxation on business. Whether the U.S. economy was strengthened as a whole remains unclear.
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