The downside of federalism in facing national and global challenges

Federalism is the system of governance in which sovereignty is divided between a central authority and constituent political units. In the United States this system is distributes power between a central national government and fifty state governments.

U.S. political history is full of conflict about the proper definition of power between the national and state governments whether it pertain to the Articles of Confederation, the American Civil War, “states’ rights”, civil rights, and on and on. The governance of states is based upon boundaries drawn, in some cases, centuries ago. Boundaries of state government have no relationship to population or communities of interest. Yet, our election of representatives to Congress (especially the Senate) and the President via the Electoral College are based upon boundaries that don’t necessarily make any sense and certainly do not reflect the numbers or the interests of Americans.

Matthew Yglesias sees it this way:

I think the reality is that America’s strong version of federalism—some kind of administrative decentralization is necessary in such a large country—has always been problematic. The whole point of writing the Constitution in the first place was to weaken the super-strong federalism of the Articles of Confederation. And even with a stronger central government in place, the main role of federalism was to make it more difficult to wipe out large-scale chattel slavery. The fiscal aspects of federalism prevented fiscal policy from being effective during the Great Depression. With slavery vanquished, federalism once again reared its head as a staunch defender of Jim Crow. Federalism is the genesis of the incredibly pernicious United States Senate, about which I’ve already said plenty.

Strong federalism is even the enemy of sensible decentralization. Since the states are “sovereign” and represented as such in the Congress, there’s no way to reorganize America’s administrative subdivisions no matter how anachronistic they’ve become. Thus some states, like California and Texas, have grown to immense proportions while other states (Wyoming, e.g.) are tiny and shrinking. And we can’t set up sensible administrative units that might reflect how people’s lives are actually lived. Hoboken and Manhattan are in totally different jurisdictions even while New York City can have its local transportation ideas foiled by state legislators from Rochester. Some parts of the DC suburbs are involved in the governance of Norfolk and other parts of the DC suburbs are involved in the governance of Annapolis, but there’s no level of government at which DC and its suburbs can collaborate on common issues.

The United States has made do with this awkward structure of government for most of its history but the 20th and 21st Centuries have presented the nation with challenges that are truly national, and in some cases global, in which state governments are wholly inadequate to address and, in fact, can be a drag on efforts by the national government. For example, state governments still rule most of our educational and transportation systems unlike most advanced nations in the world and the inefficiency and waste of fifty different systems costly to Americans competing in a global economy.

And speaking of the economy, we are burdened with a system of governance that allows the states (California is only the most egregious example) to undermine the efforts of the national government to revive a moribund economy. James Suroweicki explains:

If you came up with a list of obstacles to economic recovery in this country, it would include all the usual suspects—our still weak banking system, falling house prices, overindebted consumers, cautious companies. But here are fifty culprits you might not have thought of: the states. Federalism, often described as one of the great strengths of the American system, has become a serious impediment to reversing the downturn.

It’s easy enough, of course, to mock state governments nowadays, what with California issuing I.O.U.s to pay its bills and New York’s statehouse becoming the site of palace coups and senatorial sit-ins. But the real problem isn’t the fecklessness of local politicians. It’s the ordinary way in which state governments go about their business. Think about the $787-billion federal stimulus package. It’s built on the idea that during serious economic downturns the government can use spending increases and tax cuts to counteract the effects of consumers who are cutting back on spending and businesses that are cutting back on investment. So fiscal policy at the national level is countercyclical: as the economy shrinks, government expands. At the state level, though, the opposite is happening. Nearly every state government is required to balance its budget. When times are bad, jobs vanish, sales plummet, investment declines, and tax revenues fall precipitously—in New York, for instance, state revenues in April and May were down thirty-six per cent from a year earlier. So states have to raise taxes or cut spending, or both, and that’s precisely what they’re doing: states from New Jersey to Oregon have raised taxes in the past year, while significant budget cuts have become routine and are likely to get only deeper in the year ahead. The states’ fiscal policy, then, is procyclical: it’s amplifying the effects of the downturn, instead of mitigating them. Even as the federal government is pouring money into the economy, state governments are effectively taking it out. It’s a push-me, pull-you approach to fighting the recession.

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The tension between state and national interests isn’t new: it dates back to clashes in the early Republic over programs for “internal improvements.” Of course, the federal government is far bigger than it once was, and yet in the past two decades we’ve delegated more authority, not less, to the states. The logic of this was clear: people who are closer to a problem often know better how to deal with it. But matters of a truly interstate nature, like the power grid, can’t be dealt with on a state-by-state basis. And fiscal policy is undermined if the federal government is doing one thing and the states are doing another. It’s a global economy. It would be helpful to have a genuinely national government.

You can read the entire pieces by Matthew Yglesias here and James Suroweicki here.