Federalism: Why Care?

In the face of climate change, the threat of the far right, or rampant police violence, federalism can seem like a boring and arcane topic to talk about. But we ignore or downplay it at our peril. Federalism remains one of the most important influences on American political development.

As the political scientist David Brian Robertson has argued, federalism is key to understanding the nature of US politics because it shaped the terrain of political conflict, generated powerful path dependencies that limit the scope of government action, and structured the sequence of events in the development of US public policy.

The founding act was unusual in many ways, not least because the constitution hammered out in 1787 preserved the already-existing states and their institutions in their current form. As Kettl points out, “No other new nation had ever attempted to have its constituent parts create a strong national government without those parts deconstituting themselves in the process.”

While there are many other federal states in the world, including our neighbors to the north and south, the particularities of US federalism helped to set the country’s political and economic development on a rather unique course.

The Constitution granted significantly more powers to the federal government than the Articles of Confederation. But it also granted a wide array of authorities and powers to the state governments, including many of the most routine functions of government and the regulation of everyday life. States had broad recourse to the use of “police power,” a concept that is not simply limited to law enforcement. As the historian Gary Gerstle has observed, “police power conferred on states the right and the duty to look after the economic, social, and moral welfare of their citizens,” including everything from issuing corporate charters and building highways, to creating public school systems, to rules governing gambling, drinking, and sex work.

They also retain authority over elections, which results in a confusing patchwork of rules that make it easier or harder for people to exercise their voting rights depending on where they live. Federalism made its most obvious and decisive contribution to US political development in the protection of slavery and the maintenance of Jim Crow after its abolition. It also played a key role in shaping the particularly American variety of capitalism by giving states the authority to govern many of the most important aspects of economic development well into the twentieth century.

As such, federalism has tended to reward political organizations that are fragmented and decentralized. It encouraged the emergence of a “pluralist” system of interest group bargaining, in which a wide array of narrow interests compete to influence particular areas of government action. As Robertson argues, this arrangement “contributed to the development of political parties that were too broad, and pressure groups that were too narrow, to stand for a clear, wide-ranging national policy agenda.”

Early extension of suffrage rights to propertyless white males allowed for the development of mass-oriented political parties by the early nineteenth century. But American parties were often little more than confederations of state and local interests, which hamstrung their ability to deal with the fallout of capitalist industrialization and other issues that didn’t stop at state borders.

Parties held their supporters together through patronage and spoils rather than a shared commitment to a coherent program. And in contrast to many other countries, US parties have long had relatively little control over who is nominated for office under their label, a situation that Bernie Sanders and other democratic socialists have sought to exploit through tactical contestation of the Democratic Party ballot line.

The same factors that shaped political party development also shaped the structure of class conflict in the US. Like the parties, federalism gave business and labor alike strong incentives to organize in a fragmented and decentralized manner. By making it very difficult to build and maintain political alliances across the country, federalism has generally operated to protect and advance already-powerful private interests, particularly business interests.

In addition, economic competition between the states generates pressure on politicians to maintain a favorable business climate by keeping taxes low, balancing budgets, and keeping social welfare spending in check. Witness, for example, New York Governor Andrew Cuomo’s rejection of higher taxes on billionaires because they say they’ll leave the state. These are often empty threats, but blackmail doesn’t have to be grounded in reality in order to be effective.

At the same time, the sheer extent of the country fractured business interests geographically and divided them within and across industries. Peak organizations of US business like the Chamber of Commerce are weaker than their counterparts in other countries, which tend to be far more centralized and capable of influencing government policy on behalf of business as a whole.

Compared to Italy’s Confindustria or Germany’s BDI, US business interests tend to be more fragmented and less coordinated. In that sense, one could make a plausible argument that American capitalists are dominant but not hegemonic, in Gramsci’s sense. Specific business interests are quite powerful in their particular industries and fields, but they have tended not to be able to effectively organize themselves as a relatively coherent and unified class.

By the same token, federalism has powerfully influenced the shape of labor organization in the US and helped to weaken it in the face of business power. The AFL-CIO and its constituent unions are fragmented and decentralized, mirroring the structure of the US state and the organization of business interests. This situation encouraged the dominance of narrow, economistic, and craft-oriented approaches to labor organization that have long defined the AFL and distinguish it from its counterparts in many other countries.

It also systematically inhibited the development of a powerful and nationally-coordinated socialist movement in the US. As Madison argued in Federalist 10, federalism and the separation of powers were explicitly intended to thwart not just any possible majority, but a majority “for paper money, for an abolition of debts, for an equal division of property, or for any other improper or wicked project” in particular.

The goal was, in short, to make democracy — which since ancient times meant the rule of the poor — compatible with the rule of property. By creating a collective action problem of such magnitude, the founders pulled off a pretty neat trick: they made it exceedingly difficult for the masses to exercise power without taking away rights and freedoms they won during the revolutionary struggle against Britain.

Engines of Inequality

Federalism was the price paid for Southern acceptance of the Constitution. After the abolition of slavery, it allowed the ex-Confederate states to maintain a “low-road” approach to capitalist development that weighed on welfare-state and labor-movement development in the country as a whole. In this sense, the states have not been laboratories of democracy, as federalism’s defenders have so often claimed, but rather laboratories of despotism and engines of inequality.

One of the core insights of Kettl’s book is that the government that Americans receive is increasingly dependent on where they happen to live. Some states simply have more resources to spend than others, but some states choose to spend money on services that other states do not.

The best example of this dynamic is probably Medicaid, which is not one single program but rather fifty-one for each state and the District of Columbia. As Kettl rightly puts it, “Medicaid is an unwieldy contraption that no one would have consciously designed from scratch, but it is also the natural result of the effort to expand coverage without greatly expanding government — except its budget.” It has become an extraordinarily complex program in which the states retain substantial decision-making authority over the services they provide, which in turn sustains major inequalities in access to health care among a very large segment of the population.

Liberals tend to see complexity in public policy as a virtue, a sign of pragmatic statesmanship. But such complexity often breeds bewilderment among average citizens, who often don’t understand how policy works or who actually benefits from it — which in turn tends to generate popular disillusionment in politics and government action generally.

Giving states a significant share of responsibility in the expansion of federal government activity may have been an unavoidable tactical maneuver by national policymakers, but it has had significant negative consequences for the process of American state building. As Kettl concludes, this “inevitably created a system far more complex in politics, policy, and management than any of the other Western democratic systems that traveled down the same road” in expanding social spending and public services in the twentieth century.

The long-running battle over the Obama administration’s Medicaid expansion was difficult for even the most informed citizens to follow. As Kettl observes, recent polls show that nearly half the public “did not know the difference between Medicare’s coverage for the elderly and Medicaid’s support for the poor. … Enormous variations have emerged from a system that, because of the administrative complexities of managing it, has become so complex that few people can understand it.” By transferring so many financial and administrative issues to the states, federalism has helped to generate intolerable inequalities in health care coverage, and therefore health outcomes, between people in different states.

Can one or more states lead us out of this morass through bold, progressive action? It doesn’t seem likely. Federal policymakers are increasingly unwilling to let some states indirectly set national policy. See, for example, the bitter legal battle between the White House and California over the state’s market-shaping fuel economy standards.

Even if a state like California or New York succeeded in establishing its own state-based single-payer health plan, it’s not clear that this would galvanize a movement to nationalize coverage to all Americans through an act of Congress. It could just as well produce an even more fragmented health system that undermines what remains of Medicaid and Medicare in states that can’t or won’t implement their own state-based plans.

A Constitutional Moment?

The pandemic is grim proof that the price of federalism is, in many respects, far too high to pay. The ever-rising death toll is bad enough on its own. The creaky and inadequate unemployment insurance systems the states run are failing those who have managed to avoid illness but not the wave of joblessness the virus brought in its wake. They’ve punished millions of unemployed people who have committed no offense beside living in Mississippi, Florida, or North Carolina.

Northern states have their own problems, too. New Jersey’s unemployment system runs on a near-dead programming language, and New York had to call on Google to bail it out amid the crush of claims. (It also offers some of the stingiest benefits in the region.)

Kettl’s conclusion that federalism just doesn’t work anymore would have been correct even before the pandemic hit. The crisis has only reinforced the urgency of his diagnosis, and points to the dire need for fundamental changes in the organization of American government. That’s why it’s disappointing that his prescriptions for dealing with the problem fall well short of the scale of the mounting constitutional crisis.

As one of New York’s delegates to the Constitutional Convention, Hamilton called for the abolition of the states as sovereigns and their reduction to mere administrative and electoral units of a strong national government. Hamilton did not really expect to find significant support for this proposal, but it reflected a wariness toward the states that is often not remembered. Madison’s own “Virginia plan” for the Constitution included a national veto over state laws and Congressional power to order military intervention in states that defy federal law.

Kettl is right that such radically centralizing measures are not forthcoming, and their desirability is certainly debatable. But the proposals he makes in their place are pretty weak tea.

In Kettl’s view, the problems of federalism can only be solved by ever-more creative uses of federalism itself. The three main dimensions of his “Hamiltonian solution” are to focus federal grants to states on anti-inequality measures, a more explicit strategy of expanding successful state-level policy experiments, and giving local governments a more prominent place in the federal system.

In each case, the specifics are quite underwhelming. He proposes handing the federal government full control over Medicaid but not rolling it into a plan to expand Medicare for all — which he absurdly equates with the Trumpian call to “Make America Great Again.” When it comes to learning from state experiments, there are no details beyond references to welfare reform in Wisconsin  — which has been a disaster for the state’s working poor — and California’s environmental policies. As for a greater role for local government, he advocates a Bloombergian emphasis on “data and transparency” that will do little to attack the roots of American inequality — municipalities simply don’t have the resources to do so on their own.

As we hurtle toward a potentially disastrous presidential election, two things are abundantly clear. The first is the need for compelling ideas for a new constituent process, and the second is that the US Left has done next to no thinking along these lines.

Amending the Constitution using its formal procedures is a dead letter. Under the Article V amendment process, just thirteen states representing a small minority of the population could band together to block an amendment supported by a popular majority — an outcome that is all but assured by the current alignment of political forces. So a good deal of creativity and audacity is required in formulating measures to meet the constitutional moment.

The constitutional scholar Bruce Ackerman has proposed an interesting scheme that would kick off a public debate over the country’s constitutional future. As he describes the “Popular Sovereignty Initiative” in Revolutionary Constitutions, it would

authorize a president, upon his or her successful reelection, to ask Congress to put proposed amendments before the voters in a national referendum at the next presidential election. If Congress agrees, this means that the voters will be making their decision while its presidential proponent is about to leave office. Even if the president manages to convince a majority to approve the initiatives, this should not be enough to make them part of the living Constitution of the twenty-first century. Instead, it would set the stage for a second referendum at the next presidential election four years later. During the interim, the amendment package would be exposed to countless conversations at work, at home, and in civil society — at a time when its initiating president is now in retirement, and must rely heavily on rising political leaders to make the case. Only if this second referendum generates a strong Yes vote should the amendment package be recognized as a part of the twenty-first-century Constitution.

This will strike many as, at best, an intriguing thought experiment by an impractical professor. That may well be the case. But it’s incumbent upon the Left to offer more than a pragmatic acceptance of the given constitutional order on one hand, and “dual power” fantasies on the other. These questions are on the Right’s agenda. They need to be on ours, too.