Chapter 3 Vocabulary
bill of attainder
a legislative action declaring someone guilty without a trial; prohibited under the Constitution
a type of grant that comes with less stringent federal administrative conditions and provides recipients more latitude over how to spend grant funds
a federal transfer formulated to limit recipients’ discretion in the use of funds and subject them to strict administrative criteria
shared state and federal powers that range from taxing, borrowing, and making and enforcing laws to establishing court systems
a style of federalism in which both levels of government coordinate their actions to solve national problems, leading to the blending of layers as in a marble cake
a process in which powers from the central government in a unitary system are delegated to subnational units
a style of federalism in which the states and national government exercise exclusive authority in distinctly delineated spheres of jurisdiction, creating a layer-cake view of federalism
the last clause of Article I, Section 8, which enables the national government to make all Laws which shall be necessary and proper for carrying out all its constitutional responsibilities
ex post facto law
a law that criminalizes an act retroactively; that is after the fact; this is prohibited under the Constitution
an institutional arrangement that creates two relatively autonomous levels of government, each possessing the capacity to act directly on the people with authority granted by the national constitution
full faith and credit clause
found in Article IV, Section 1, of the Constitution, this clause requires states to accept court decisions, public acts, and contracts of other states; also referred to as the comity provision
general revenue sharing
a type of federal grant that places minimal restrictions on how state and local governments spend the money
the gradual movement of states into the immigration policy domain traditionally handled by the federal government
a style of federalism premised on the idea that the decentralization of policies enhances administrative efficiency, reduces overall public spending, and improves outcomes
a doctrine promoted by John Calhoun of South Carolina in the 1830s, asserting that if a state deems a federal law unconstitutional, it can nullify it within its borders
privileges and immunities clause
found in Article IV, Section 2, of the Constitution, this clause prohibits states from discriminating against out-of-staters by denying such guarantees as access to courts, legal protection, property and travel rights
a dynamic in which states compete to attract business by lowering taxes and regulations
federal laws and regulations that impose obligations on state and local governments without fully compensating them for the costs of implementation
a centralized system of government in which the subnational government is dependent on the central government, where substantial authority is concentrated
Federalism figures prominently in the U.S. political system. Specifically, the federal design spelled out in the Constitution divides powers between two levels of government—the states and the federal government—and creates a mechanism for them to check and balance one another. As an institutional design, federalism both safeguards state interests and creates a strong union led by a capable central government. American federalism also seeks to balance the forces of decentralization and centralization. We see decentralization when we cross state lines and encounter different taxation levels, welfare eligibility requirements, voting regulations and other laws.
Centralization is apparent in the fact that the federal government is the only entity permitted to print money or to employ money grants and mandates to shape state actions. Colorful billboards with simple messages may greet us at state borders, but behind them lies a complex and evolving federal design that has structured relationships between states and the federal government since the late 1700s.
What specific powers and responsibilities are granted to the federal and state governments? How does our process of government keep these separate governing entities in balance? To answer these questions and more, this chapter traces the origins, evolution, and functioning of the American system of federalism, as well as its advantages and disadvantages for citizens.
3.1 The Division of Powers
By the end of this section, you will be able to:
- Explain the concept of federalism
- Discuss the constitutional logic of federalism
- Identify the powers and responsibilities of federal, state, and local governments
Modern democracies divide governmental power in two general ways; some, like the United States, use a combination of both structures. The first and more common mechanism shares power among three branches of government—the legislature, the executive, and the judiciary. The second, federalism, apportions power between two levels of government: national and subnational. In the United States, the term federal government refers to the government at the national level, while the term states means governments at the subnational level.
FEDERALISM DEFINED AND CONTRASTED
Federalism is an institutional arrangement that creates two relatively autonomous levels of government, each possessing the capacity to act directly on behalf of the people with the authority granted to it by the national constitution. Although today’s federal systems vary in design, five structural characteristics are common to the United States and other federal systems around the world, including Germany and Mexico.
First, all federal systems establish two levels of government, with both levels being elected by the people and each level assigned different functions. The national government is responsible for handling matters that affect the country as a whole, for example, defending the nation against foreign threats and promoting national economic prosperity. Subnational, or state governments, are responsible for matters that lie within their regions, which include ensuring the well-being of their people by administering education, health care, public safety, and other public services. By definition, a system like this requires that different levels of government cooperate, because the institutions at each level form an interacting network.
In the U.S. federal system, all national matters are handled by the federal government, which is led by the president and members of Congress, all of whom are elected by voters across the country. All matters at the subnational level are the responsibility of the fifty states, each headed by an elected governor and legislature. Thus, there is a separation of functions between the federal and state governments, and voters choose the leader at each level.
The second characteristic common to all federal systems is a written national constitution that cannot be changed without the substantial consent of subnational governments. In the American federal system, the twenty-seven amendments added to the Constitution since its adoption were the result of an arduous process that required approval by two-thirds of both houses of Congress and three-fourths of the states. The main advantage of this supermajority requirement is that no changes to the Constitution can occur unless there is broad support within Congress and among states. Numerous national amendment initiatives have failed because they cannot garner sufficient consent among members of Congress or the states. This is not a drawback. Having the requirement that most states need to approve any constitutional amendment is critical in keeping the constitution stable and able to serve the entirety of the population rather than special interests or only those areas of the country with high population numbers.
Third, the constitutions of countries with federal systems formally allocate legislative, judicial, and executive authority to the two levels of government in such a way as to ensure each level some degree of autonomy and separation from the other. Under the U.S. Constitution, the president assumes executive power, Congress exercises legislative powers, and the federal courts (e.g., U.S. district courts, appellate courts, and the Supreme Court) assume judicial powers. In each of the fifty states, a governor assumes executive authority, a state legislature makes laws, and state-level courts (e.g., trial courts, intermediate appellate courts, and supreme courts) possess judicial authority.
While each level of government is somewhat independent of the others, a great deal of interaction occurs among them. In fact, the ability of the federal and state governments to achieve their objectives often depends on the cooperation of the other level of government. For example, the federal government’s efforts to ensure homeland security are bolstered by the involvement of law enforcement agents and state national guard units working at local and state levels. On the other hand, the ability of states to provide their residents with public education and health care is arguably enhanced by the federal government’s financial assistance.
Another common characteristic of federalism around the world is that national courts commonly resolve disputes between levels and departments of government. In the United States, conflicts between states and the federal government are adjudicated by federal courts, with the U.S. Supreme Court being the final arbiter. The resolution of such disputes can preserve the autonomy of one level of government, as illustrated recently when the Supreme Court ruled that states cannot interfere with the federal government’s actions relating to immigration. In other instances, a Supreme Court ruling can erode that autonomy, as demonstrated in the 1940s when, in United States v. Wrightwood Dairy Co., the Court enabled the federal government to regulate commercial activities that occurred within states, a function previously handled exclusively by the states.
Finally, subnational governments are always represented in the upper house of the national legislature, enabling regional interests to influence national lawmaking. In the American federal system, the U.S. Senate functions as a territorial body by representing the fifty states: Each state elects two senators to ensure equal representation regardless of state population differences. Thus, federal laws are shaped in part by state interests, which senators convey to the federal policymaking process.
LINK TO LEARNING
The governmental design of the United States is unusual; most countries do not have a federal structure. Aside from the United States, how many other countries have a federal system? You can check out this link to find out.
Division of power can also occur via a unitary structure or confederation. In contrast to federalism, a unitary system makes subnational governments dependent on the national government, where significant authority is concentrated. Before the late 1990s, the United Kingdom’s unitary system was centralized to the extent that the national government held the most important levers of power. Since then, power has been gradually decentralized through a process of devolution, leading to the creation of regional governments in Scotland, Wales, and Northern Ireland as well as the delegation of specific responsibilities to them. Other democratic countries with unitary systems, such as France, Japan, and Sweden, have followed a similar path of decentralization.
In a confederation, authority is decentralized, and the central government’s ability to act depends on the consent of the subnational governments. As discussed previously, under the Articles of Confederation (the first constitution of the United States), the individual states were sovereign and powerful while the national government was subordinate and weak. Because states were reluctant to give up any of their power, the national government lacked authority in the face of challenges such as servicing the war debt, ending commercial disputes among states, negotiating trade agreements with other countries, and addressing uprisings that were sweeping the country. As the brief American experience with confederation clearly shows, the main drawback with this system of government is that it maximizes regional self-rule at the expense of effective national governance.
FEDERALISM AND THE CONSTITUTION
The Constitution contains several provisions that direct the functioning of U.S. federalism. Some delineate the scope of national and state power, while others restrict it. The remaining provisions shape relationships among the states and between the states and the federal government.
The enumerated powers of the national legislature are found in Article I, Section 8.
These powers define the jurisdictional boundaries within which the federal government has authority. In seeking not to re-create the problems that plagued the young country under the Articles of Confederation, the Constitution’s framers granted Congress specific powers that ensured its authority over national and foreign affairs and with the Bill of Rights assured individual liberties of citizens.
To provide for the general welfare of the populace, Congress can tax, borrow money, regulate interstate and foreign commerce, and protect property rights. To provide for the common defense of the people, the federal government can raise and support armies and declare war. Furthermore, national integration and unity are fostered with the national government’s powers over the coining of money, naturalization, postal services, and other responsibilities.
The last clause of Article I, Section 8, commonly referred to as the elastic clause or the necessary and proper cause, enables Congress “to make all Laws which shall be necessary and proper for carrying” out its constitutional responsibilities. While the enumerated powers define the policy areas in which the national government has authority, the elastic clause allows it to create the legal means to fulfill those responsibilities.
Unfortunately, the open-ended construction of this clause has enabled the national government to expand its authority well beyond what is specified in the Constitution. This continuing consolidation of power is also evidenced by the expansive interpretation of the commerce clause, which empowers the federal government to regulate interstate economic transactions. Many believe the commerce clause has been completely over-used in the creation of laws that the federal government has absolutely no business being involved with under the U.S. Constitution.
SIDEBAR: By some estimations 6 out of every 100 persons in the United States works directly for or are contracted by the federal government! Read this article (optional). Do you believe as the authors seem to, that the federal government has become too large? Would the country’s early leaders and founders have been comfortable with over 1/20th of the population being employed by taxpayers? Has the power to tax and print money given the national government too much power? Do you believe that the federal government has over-stepped its constitutionally mandated authority?
The powers of the state governments were never listed in the original Constitution. The consensus among the framers was that states and individual citizens would retain any powers not prohibited by the Constitution or delegated to the national government. However, when it came time to ratify the Constitution, a number of states requested that an amendment be added explicitly identifying some of the reserved powers of the states. What these Anti-Federalists sought was stronger assurance that the national government’s capacity to act directly on behalf of the people would be restricted, which the first ten amendments (aka The Bill of Rights) provided. The Tenth Amendment affirms the states’ and people’s reserved powers: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” Indeed, state constitutions had bills of rights, which the first Congress used as the source for the first ten amendments to the Constitution.
Some of the states’ reserved powers are no longer exclusively within state domain, however. For example, since the 1940s, the federal government has also engaged in administering health, safety, income security, education, and welfare to state residents. The boundary between intrastate and interstate commerce has become indefinable as a result of what many consider broad misinterpretation and misapplication of the commerce clause. Shared and overlapping powers have become an integral part of contemporary U.S. federalism. These concurrent powers range from taxing, borrowing, and making and enforcing laws to establishing court systems.
Article I, Sections 9 and 10, along with several constitutional amendments, notably the first, second, fourth and fifth amendments, lay out the restrictions on federal and state authority. The most important restriction Section 9 places on the national government prevents measures that cause the deprivation of personal liberty. Specifically, the government cannot suspend the writ of habeas corpus, which enables someone in custody to petition a judge to determine whether that person’s detention is legal; pass a bill of attainder, a legislative action declaring someone guilty without a trial; or enact an ex post facto law, which criminalizes an act committed in the past (retroactively). The Bill of Rights affirms and expands these constitutional restrictions, ostensibly ensuring that the government cannot encroach on personal freedoms and the fourteenth amendment assures that the States must also recognize the constitutional rights and liberties of citizens.
The states are also constrained by the Constitution. Article I, Section 10, prohibits the states from entering into treaties with other countries, coining their own money, or levying taxes on imports and exports. Like the federal government, the states cannot violate personal freedoms by suspending the writ of habeas corpus, passing bills of attainder, or enacting ex post facto laws.
Furthermore, the Fourteenth Amendment, ratified in 1868, prohibits the states from denying citizens the rights to which they are entitled by the Constitution with all of its amendments, due process of law, or the equal protection of the laws.
Lastly, three civil rights amendments—the Fifteenth, Nineteenth, and Twenty-Sixth — prevent both the states and the federal government from abridging citizens’ right to vote based on race, sex, and age.
The supremacy clause in Article VI of the Constitution regulates relationships between the federal and state governments by declaring that the Constitution and federal law are the supreme law of the land. This means that if a state law or practice clashes with a federal law that is found to be within the national government’s constitutional authority, the federal law prevails (wins).
FANTASTIC EXAMPLES!! To more deeply understand exactly how the 14th amendment applies all Constitutional rights to each of the individual states, you can read the about the recent real-life cases spoken about in the video! DC vs Heller is the original 2007 supreme court decision wherein a constitutional amendment was shown to apply in a court case that came out of Washington DC. Later, when the precedent of Heller was NOT followed, as it legally should have been in the state of Illinois, another case called McDonald Vs Chicago was brought to the Supreme Court. The Supreme Court used the 14th Amendment to force compliance upon Illinois, because that state was refusing to follow the higher-level court’s Constitutional decision, about the Constitutional amendment that the court had decided years before in Heller’s case. In other words, the 14th amendment was used to forcibly apply rights enumerated in the Bill of Rights to ALL of the people in ALL of the states, (including Illinois) instead of just limiting the Bill of Rights to the Federal level, where the Heller case originally came from.
The intent of the supremacy clause is not to subordinate the states to the federal government; rather, it affirms that one body of laws binds the country. In fact, all national and state government officials are bound by oath to uphold the United States Constitution regardless of the offices they hold. Yet enforcement is not always that simple.
In the case of marijuana use, (which the federal government still defines to be illegal), numerous states and the District of Columbia have nevertheless established medical marijuana laws, other states have decriminalized its recreational use, and several states have completely legalized it. The federal government could act in this area and enforce federal marijuana laws if it wanted to. In addition to the legalization issue, there is the question of how to treat the money from marijuana sales, which the national government designates as drug money and regulates under laws regarding its deposit in banks.
The movement for marriage equality has put the full faith and credit clause to the test in recent decades. In light of Baehr v. Lewin, a 1993 ruling in which the Hawaii Supreme Court asserted that the state’s ban on same-sex marriage was unconstitutional, a number of states became worried that they would be required to recognize those marriage certificates. To address this concern, Congress passed and President Clinton signed the Defense of Marriage Act (DOMA) in 1996. The law declared that “No state (or other political subdivision within the United States) need recognize a marriage between persons of the same sex, even if the marriage was concluded or recognized in another state.” The law also barred federal benefits for same-sex partners.
DOMA clearly made the topic a state matter. It denoted a choice for states, which led many states to take up the policy issue of marriage equality. Scores of states considered legislation and ballot initiatives on the question. The federal courts took up the issue with zeal after the U.S. Supreme Court in United States v. Windsor struck down the part of DOMA that outlawed federal benefits. That move was followed by upwards of forty federal court decisions that upheld marriage equality in particular states. In 2014, the Supreme Court decided not to hear several key case appeals from a variety of states, all of which were brought by opponents of marriage equality who had lost in the federal courts. The outcome of not hearing these cases was that federal court decisions in four states were affirmed, which, when added to other states in the same federal circuit districts, brought the total number of states permitting same-sex marriage to thirty. Then, in 2015, the Obergefell v. Hodges case had a sweeping effect when the Supreme Court clearly identified a constitutional right to marriage based on the Fourteenth Amendment.
SIDEBAR: Unfortunately, from time to time, there are still instances where the authority of the 14th amendment needs to be reaffirmed by the courts.
One easy to illustrate example in which interstate comity (the mutual recognition by nations of the laws and customs of others) is as of yet not recognized is in the area of the second amendment’s specifically enumerated right for individuals to bear arms. Many states have individually negotiated concealed weapon license reciprocation provisions in their laws, which allow concealed weapon permit holders from one state to carry weapons under their own state’s CCW license if that state allows the other state’s citizens to do the same while traveling. Some states, like Idaho or Connecticut, do not require any reciprocity at all and allow any permit holder from any state to carry concealed within their borders. Still others, like California or New York do not recognize ANY concealed weapons permits issued by any other states whatsoever thereby denying the right to bear arms to anyone not a citizen of their state.
As you can see, using this interactive map, what a confusing mess it becomes when states do not recognize the constitutionally enumerated rights of ALL U.S. citizens who travel from outside of their own borders.
Imagine what would happen if each state did not recognize all other state’s driver’s licenses or marriage licenses if they were not issued within their own borders. Imagine this same map, but instead of CCW permits it applied to driver’s licenses. Imagine trying to do a cross country road trip and not run afoul of the law. In some states you could be arrested for driving without a license while in others you’d be perfectly fine with the one your state had issued. Imagine if you were on that same road trip and as you passed over certain state lines you would be legally married and as you crossed other state lines your marriage was considered invalid. This is no small thing. Many other laws and rights are implicated by marital status. For example: in many places a spouse cannot be made to testify against their partner under the protections of 5th Amendment.
This is why the 14th amendment and the privileges and immunities clause is so critical. These protect the rights of every citizen in every state. If you are married in Hawaii, then Delaware must recognize that marriage. If you have the right to go to church where you want in Texas, you also have the right to do so in all of the other states as well regardless of which state you actually live in.
The privileges and immunities clause of Article IV asserts that states are prohibited from discriminating against out-of-staters by denying them such guarantees as access to courts, legal protection, property rights, and travel rights. The clause has not been interpreted to mean there cannot be any difference in the way a state treats residents and non-residents. For example, individuals cannot vote in a state in which they do not reside, tuition at state universities is higher for out-of-state residents, hunting licenses typically cost more for non-residents, and in some cases individuals who have recently become residents of a new state must wait a certain amount of time to be eligible for social welfare benefits in their new home.
Another constitutional provision prohibits states from establishing trade restrictions on goods produced in other states. However, a state can tax out-of-state goods sold within its borders as long as state-made goods are taxed at the same level.
THE DISTRIBUTION OF FINANCES
Economics Always Plays a Huge Role in Government!
Federal, state, and local governments depend on different sources of revenue to finance their annual expenditures. In 2021, total revenue (or receipts) reached $4.05 trillion for the federal government, $2.1 trillion for the states, and $1.5 trillion for local governments. Two important developments have fundamentally changed the allocation of revenue since the early 1900s. First, the ratification of the Sixteenth Amendment in 1913 authorized Congress to impose income taxes without apportioning it among the states on the basis of population, a burdensome provision that Article I, Section 9, had imposed on the national government. With this change, the federal government’s ability to raise revenue exponentially increased and so did its ability to exponentially spend more as well.
This infographic shows the sources of revenue for the federal government in 2020:
Let’s take a look at where some of the federal taxes are applied. The United States federal budget is divided into three categories: mandatory spending, discretionary spending, and interest on debt.
Also known as entitlement spending, mandatory spending is government spending on certain programs that are required by law. The bulk of mandatory spending is for entitlement programs, which are social welfare programs. Commonly given examples include Social Security, Medicare, and unemployment insurance. Though many believe that these are not ‘social welfare’ programs because many, if not most, of the recipients pay into them before they collect at a later date, these programs are still mandatory spending programs. The following graphic is from the Congressional Budget Office and illustrates mandatory spending by the federal government.
Discretionary spending on the other hand will not occur unless Congress acts each year to provide the funding through an appropriations bill. Discretionary spending can change over the years as the priorities of the government change. The funding of the United States government is provided for through thirteen separate appropriations bills, and these bills must be passed every year prior to the start of the fiscal year to prevent a shut-down of the functions and activities of the Federal Government. Examples of discretionary spending include NASA, the military, national parks, transportation infrastructure, and many others.
State governments get revenue from taxes (such as sales tax) and federal grants. Federal grants don’t have to be repaid. Many federal grants often come with strings attached that force states to pursue federal policy objectives they might not otherwise adopt. Sales tax includes taxes on purchased food, clothing, alcohol, amusements, insurance, motor fuels, tobacco products, and public utilities. States also get revenue from service charges (e.g., tuition revenue from public universities and fees for hospital-related services.
The tax structure of states varies. Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming do not have any state income taxes at the time of this writing. New Hampshire doesn’t tax earned wages. Washington state levies an income tax on investment income and capital gains, but it is only for certain high earners. In order to maintain economic stability however, many of the previously named states have much higher levels of other taxes such as sales taxes or energy taxes. Note: The actual income tax rates for the states on the map may change year-to-year. If you are curious about a specific state’s current tax rate, look it up online.
The following chart is a bit old, but it should give you a general idea of what states spend their tax money on:
3.2 The Evolution of American Federalism
By the end of this section, you will be able to:
- Describe how federalism has evolved in the United States
- Compare different conceptions of federalism
The Constitution sketches a federal framework that aims to balance the forces of decentralized and centralized governance in general terms; it does not flesh out standard operating procedures that say precisely how the states and federal governments are to handle all policy contingencies imaginable. Therefore, officials at the state and national levels have generally had some room to maneuver as they operate within the Constitution’s federal design. This has led to changes in the configuration of federalism over time, changes corresponding to different historical phases that capture distinct balances between state and federal authority.
THE STRUGGLE BETWEEN NATIONAL POWER AND STATE POWER
As George Washington’s secretary of the treasury from 1789 to 1795, Alexander Hamilton championed legislative efforts to create a publicly chartered bank. For Hamilton, the establishment of the Bank of the United States was fully within Congress’s authority, and he hoped the bank would foster economic development, print and circulate paper money, and provide loans to the government. Although Thomas Jefferson, Washington’s secretary of state, staunchly opposed Hamilton’s plan on the constitutional grounds that the national government had no authority to create such an instrument, Hamilton managed to convince the reluctant president to sign the legislation.
When the bank’s charter expired in 1811, Jeffersonian Democratic-Republicans prevailed in blocking its renewal. However, the fiscal hardships that plagued the government during the War of 1812, coupled with the fragility of the country’s financial system, convinced Congress and then-president James Madison to create the Second Bank of the United States in 1816. Many states rejected the Second Bank, arguing that the national government was infringing upon the states’ constitutional jurisdiction.
A political showdown between Maryland and the national government emerged when James McCulloch, an agent for the Baltimore branch of the Second Bank, refused to pay a tax that Maryland had imposed on all out-of-state chartered banks. The standoff raised two constitutional questions: Did Congress have the authority to charter a national bank? Were states allowed to tax federal property? In McCulloch v. Maryland, Chief Justice John Marshall argued that Congress could create a national bank even though the Constitution did not expressly authorize it. Under the necessary and proper clause of Article I, Section 8, the Supreme Court asserted that Congress could establish “all means which are appropriate” to fulfill “the legitimate ends” of the Constitution. In other words, the bank was an appropriate instrument that enabled the national government to carry out several of its enumerated powers, such as regulating interstate commerce, collecting taxes, and borrowing money.
This ruling established the doctrine of implied powers, granting Congress a vast source of discretionary power to achieve its constitutional responsibilities. The Supreme Court also sided with the federal government on the issue of whether states could tax federal property. Under the supremacy clause of Article VI, legitimate national laws trump conflicting state laws. As the court observed, “the government of the Union, though limited in its powers, is supreme within its sphere of action and its laws, when made in pursuance of the constitution, form the supreme law of the land.” Maryland’s action violated national supremacy because “the power to tax is the power to destroy.” This second ruling established the principle of national supremacy, which prohibits states from meddling in the lawful activities of the national government.
Defining the scope of national power was the subject of another landmark Supreme Court decision in 1824. In Gibbons v. Ogden, the court had to interpret the commerce clause of Article I, Section 8; specifically, it had to determine whether the federal government had the sole authority to regulate the licensing of steamboats operating between New York and New Jersey. Aaron Ogden, who had obtained an exclusive license from New York State to operate steamboat ferries between New York City and New Jersey, sued Thomas Gibbons, who was operating ferries along the same route under a coasting license issued by the federal government. Gibbons lost in New York state courts and appealed. Chief Justice Marshall delivered a two-part ruling in favor of Gibbons that strengthened the power of the national government. First, interstate commerce was interpreted broadly to mean “commercial intercourse” among states, thus allowing Congress to regulate navigation. Second, because the federal Licensing Act of 1793, which regulated coastal commerce, was a constitutional exercise of Congress’s authority under the commerce clause, federal law trumped the New York State license-monopoly law that had granted Ogden an exclusive steamboat operating license. As Marshall pointed out, “the acts of New York must yield to the law of Congress.”
Various states railed against the nationalization of power that had been going on since the late 1700s. When President John Adams signed the Sedition Act in 1798, which made it a crime to speak openly against the government, the Kentucky and Virginia legislatures passed resolutions declaring the act null on the grounds that they retained the discretion to follow national laws. In effect, these resolutions articulated the legal reasoning underpinning the doctrine of nullification—that states had the right to reject national laws they deemed unconstitutional.
A nullification crisis emerged in the 1830s over President Andrew Jackson’s tariff acts of 1828 and 1832. Led by John Calhoun, President Jackson’s vice president, nullifiers argued that high tariffs on imported goods benefited northern manufacturing interests while disadvantaging economies in the South. South Carolina passed an Ordinance of Nullification declaring both tariff acts null and void and threatened to leave the Union. The federal government responded by enacting the Force Bill in 1833, authorizing President Jackson to use military force against states that challenged federal tariff laws. The prospect of military action coupled with the passage of the Compromise Tariff Act of 1833 (which lowered tariffs over time) led South Carolina to back off, ending the nullification crisis.
The ultimate showdown between national and state authority came during the Civil War. Prior to the conflict, in Dred Scott v. Sandford, the Supreme Court ruled that the national government lacked the authority to ban slavery in the territories. But the election of President Abraham Lincoln in 1860 led eleven southern states to secede from the United States because they believed the new president would challenge the institution of slavery. What was initially a conflict to preserve the Union became a conflict to end slavery when Lincoln issued the Emancipation Proclamation in 1863, freeing all slaves in the rebellious states. The defeat of the South had a huge impact on the balance of power between the states and the national government in two important ways. First, the Union victory put an end to the right of states to secede. Second, Congress imposed several conditions for readmitting former Confederate states into the Union; among them was ratification of the Fourteenth and Fifteenth Amendments. In sum, after the Civil War the power balance shifted hard toward the national government, a movement that had begun several decades before with McCulloch v. Maryland (1819) and Gibbons v. Odgen (1824).
The period between 1819 and the 1860s demonstrated that the national government sought to establish its role within the newly created federal design, which in turn often provoked the states to resist as they sought to protect their interests. With the exception of the Civil War, the Supreme Court settled the power struggles between the states and national government.
The late 1870s ushered in a new phase in the evolution of U.S. federalism. Under dual federalism, the states and national government exercise exclusive authority in distinctly delineated spheres of jurisdiction. Like the layers of a cake, the levels of government do not fully blend with one another but rather are defined. In practice however, lines do however blur and seem to have lean more toward central authority in the last century.
Two factors contributed to the emergence of this conception of federalism. First, several Supreme Court rulings blocked attempts by both state and federal governments to step outside their jurisdictional boundaries. Second, the prevailing economic philosophy at the time loathed government interference in the process of industrial development.
Industrialization changed the socioeconomic landscape of the United States. One of its effects was the concentration of market power. Because there was no national regulatory supervision to ensure fairness in market practices, collusive (something secretly done between two or more) behavior among powerful firms emerged in several industries. To curtail widespread anticompetitive practices in the railroad industry, Congress passed the Interstate Commerce Act in 1887, which created the Interstate Commerce Commission.
Three years later, national regulatory capacity was broadened by the Sherman Antitrust Act of 1890, which made it illegal to monopolize or attempt to monopolize and conspire in restraining commerce.
In the early stages of industrial capitalism, federal regulations were focused for the most part on promoting market competition rather than on addressing the social dislocations resulting from market operations, something the government began to tackle in the 1930s.
The new federal regulatory regime was dealt a legal blow early in its existence. In 1895, in United States v. E. C. Knight, the Supreme Court ruled that the national government lacked the authority to regulate manufacturing. The case came about when the government, using its regulatory power under the Sherman Act, attempted to override American Sugar’s purchase of four sugar refineries, which would give the company a commanding share of the industry. Distinguishing between commerce among states and the production of goods, the court argued that the national government’s regulatory authority applied only to commercial activities. If manufacturing activities fell within the purview of the commerce clause of the Constitution, then “comparatively little of business operations would be left for state control,” the court argued.
In the late 1800s, some states attempted to regulate working conditions. For example, New York State passed the Bakeshop Act in 1897, which prohibited bakery employees from working more than sixty hours in a week. In Lochner v. New York, the Supreme Court ruled this state regulation that capped work hours unconstitutional, on the grounds that it violated the due process clause of the Fourteenth Amendment. In other words, the right to sell and buy labor is a “liberty of the individual” safeguarded by the Constitution, the court asserted. The federal government also took up the issue of working conditions, but that case resulted in the same outcome as in the Lochner case.
The video below doesn’t have a preview icon, but it should work when you click play. 🙂 It gives you the context for the Lochner case. Lochner v. New York, 198 U.S. 45 (1905), was a landmark decision of the U.S. Supreme Court in which the Court ruled that a New York state law setting maximum working hours for bakers violated the bakers’ right to freedom of contract under the Fourteenth Amendment to the U.S. Constitution. Although the Supreme Court did not explicitly overrule Lochner, it agreed to give more deference to the decisions of state legislatures.
There are many who believe that the commerce clause has been expanded or even abused. The following (optional) 30-minute video is an interesting discussion of some of the arguments in favor of this position.
*Don’t forget, you can watch videos at 2x speed. 😉
The Great Depression of the 1930s brought economic hardships the nation had never witnessed before. Between 1929 and 1933, the national unemployment rate reached 25 percent, industrial output dropped by half, stock market assets lost more than half their value, thousands of banks went out of business, and the gross domestic product shrunk by one-quarter.
Gross domestic product: The total value of goods produced and services provided in a country for one year.
Given the magnitude of the economic depression, there was great pressure on the national government to coordinate a robust national response along with the states.
Cooperative federalism was born of arguable necessity and lasted well into the twentieth century as the national and state governments each found it beneficial. Under this model, both levels of government coordinated their actions to solve national problems, such as the Great Depression and the civil rights struggle of the following decades. In contrast to dual federalism, it erodes the jurisdictional boundaries between the states and national government, leading to a blending of layers as in a marble cake. The era of cooperative federalism contributed to the gradual incursion of national authority into the jurisdictional domain of the states, as well as the expansion of the national government’s power in concurrent policy areas.
The New Deal programs President Franklin D. Roosevelt proposed as a means to tackle the Great Depression ran afoul of the dual-federalism mindset of the justices on the Supreme Court in the 1930s. The court struck down key pillars of the New Deal—the National Industrial Recovery Act and the Agricultural Adjustment Act, for example—on the grounds that the federal government was operating in matters that were within the purview of the states. The court’s obstructionist position infuriated Roosevelt, leading him in 1937 to propose a court-packing plan that would add one new justice for each one over the age of seventy, thus allowing the president to make a maximum of six new appointments.
Before Congress took action on the proposal, the Supreme Court began leaning in support of the New Deal as Chief Justice Charles Evans Hughes and Justice Owen Roberts changed their view on federalism.
From an objective perspective, court packing is an incredibly bad idea. Court packing turns the Supreme Court into nothing more than another political entity – a second un-elected congress, rather than an institution devoted solely to determining the constitutionality of any given law as it should be. The court is supposed to be a body NOT for making law, but for deciphering the laws that were already passed by the legislative branch in light of their constitutionality.
When court packing becomes an option, it creates a political environment where any party in power can counter the last party’s judicial appointments with new appointments of their own thereby putting themselves in the position of literally being able to judge and approve their own laws, no matter how poorly devised or unconstitutionally devised they were. Court packing is a very myopic (lacking foresight) idea.
The late Supreme Court Justice Ruth Bader Ginsburg addresses this very issue in this fantastic interview excerpt about court packing and the equally bad politically motivated idea of Supreme Court justice term limits.:
In National Labor Relations Board (NLRB) v. Jones and Laughlin Steel, for instance, the Supreme Court ruled the National Labor Relations Act of 1935 constitutional, asserting that Congress can use its authority under the commerce clause to regulate both manufacturing activities and labor-management relations. The New Deal changed the relationship Americans had with the national government. Before the Great Depression, the government offered little in terms of financial aid, social benefits, and economic rights. After the New Deal, it provided, via taxing the entire country, old-age pensions (Social Security), unemployment insurance, agricultural subsidies, protections for organizing in the workplace, and a variety of other public services created during Roosevelt’s administration.
In the 1960s, President Lyndon Johnson’s administration expanded the national government’s role in society even more. Medicaid (which provides medical assistance to the indigent), Medicare (which provides health insurance to the elderly and disabled), and school nutrition programs were created. The Elementary and Secondary Education Act (1965), the Higher Education Act (1965), and the Head Start preschool program (1965) were established to expand educational opportunities and equality. The Clean Air Act (1965), the Highway Safety Act (1966), and the Fair Packaging and Labeling Act (1966) promoted environmental and consumer protection. Finally, laws were passed to promote urban renewal, public housing development, and affordable housing. In addition to these Great Society programs, the Civil Rights Act (1964) and the Voting Rights Act (1965) gave the federal government effective tools to enforce civil rights equality across the country.
While the era of cooperative federalism witnessed a broadening of federal powers in concurrent and state policy domains, it is also the era of a deepening coordination between the states and the federal government in Washington. Nowhere is this clearer than with respect to the social welfare and social insurance programs created during the New Deal and Great Society eras, most of which are administered by both state and federal authorities and are jointly funded. The Social Security Act of 1935, which created federal subsidies for state-administered programs for the elderly; people with handicaps; dependent mothers; and children, gave state and local officials wide discretion over eligibility and benefit levels.
The unemployment insurance program, also created by the Social Security Act, requires states to provide jobless benefits, but it allows them significant latitude to decide the level of tax to impose on businesses in order to fund the program as well as the duration and replacement rate of unemployment benefits. A similar multilevel division of labor governs Medicaid and Children’s Health Insurance.
Thus, the era of cooperative federalism left two lasting attributes on federalism in the United States. First, a nationalization of politics emerged as a result of federal legislative activism aimed at attempting to address national problems such as marketplace inefficiencies, social and political inequality, and poverty.
The nationalization process expanded the size of the federal administrative apparatus and increased the flow of federal grants to state and local authorities, which have helped offset the financial costs of maintaining a host of New Deal- and Great Society–era programs. The second lasting attribute is the flexibility that states and local authorities were given in the implementation of forced federal social welfare programs. One consequence of administrative flexibility, however, is that it has led to cross-state differences in the levels of benefits and coverage.
During the administrations of Presidents Richard Nixon (1969–1974) and Ronald Reagan (1981–1989), positive steps were made to reverse the process of nationalization—that is, to restore states’ prominence in policy areas into which the federal government had inserted itself in the past. New federalism is premised on the idea that the decentralization of policies enhances administrative efficiency, reduces overall public spending, and improves policy outcomes.
During Nixon’s administration, general revenue sharing programs were created that distributed funds to the state and local governments with minimal restrictions on how the money was spent. The election of Ronald Reagan heralded the advent of a “devolution revolution” in U.S. federalism, in which the president pledged to return authority to the states according to the Constitution. In the Omnibus Budget Reconciliation Act of 1981, congressional leaders together with President Reagan consolidated numerous federal grant programs related to social welfare and reformulated them in order to give state and local administrators greater discretion in using federal funds.
However, Reagan’s track record in promoting new federalism was inconsistent. This was partly due to the fact that the president’s devolution agenda met opposition from Democrats in Congress, left-leaning Republicans, and interest groups, preventing him from making further advances on that front. For example, his efforts to completely devolve Aid to Families with Dependent Children (a New Deal-era program) and food stamps, now known as the Supplemental Nutrition Assistance Program (SNAP), to the states were rejected by members of Congress, who feared states would underfund both programs, and by members of the National Governors’ Association, who believed the proposal would be too costly for states. Reagan terminated general revenue sharing in 1986.
Several Supreme Court rulings also promoted new federalism by hemming in the scope of the national government’s power, especially under the commerce clause. For example, in United States v. Lopez, the court struck down the Gun-Free School Zones Act of 1990, which banned gun possession in school zones. It argued that the regulation in question did not “substantively affect interstate commerce.” The ruling ended a nearly sixty-year period in which the court had used a wrong and overly broad interpretation of the commerce clause that, by the 1960s, allowed it to regulate numerous local commercial activities.
However, in the years since the 9/11 attacks have swung the pendulum back in the direction of centralized federal power. The creation of the Department of Homeland Security federalized disaster response power in Washington, and the Transportation Security Administration was created to federalize airport security. Broad new federal policies and mandates have also been carried out in the form of the Faith-Based Initiative and No Child Left Behind (during the George W. Bush administration) and the Affordable Care Act (during Barack Obama’s administration).
FINDING A MIDDLE GROUND
Cooperative Federalism versus New Federalism
Morton Grodzins coined the cake analogy of federalism in the 1950s while conducting research on the evolution of American federalism. Until then most scholars had thought of federalism as a layer cake, but according to Grodzins the 1930s ushered in “marble-cake federalism”: “The American form of government is often, but erroneously, symbolized by a three-layer cake. A far more accurate image is the rainbow or marble cake, characterized by an inseparable mingling of differently colored ingredients, the colors appearing in vertical and diagonal strands and unexpected whirls. As colors are mixed in the marble cake, so functions are mixed in the American federal system.”
Cooperative federalism, when correctly applied can have several potential merits:
- Because state and local governments have varying fiscal capacities, the national government’s involvement in state activities such as education, health, and social welfare is necessary to ensure some degree of uniformity in the provision of public services to citizens in richer and poorer states.
- The problem of collective action, which dissuades state and local authorities from raising regulatory standards for fear they will be disadvantaged as others lower theirs, is resolved by requiring state and local authorities to meet minimum federal standards (e.g., minimum wage and air quality).
- Federal assistance is necessary to ensure state and local programs that generate positive externalities are maintained. For example, one state’s environmental regulations impose higher fuel prices on its residents, but the externality of the cleaner air they produce benefits neighboring states. Without the federal government’s support, this state and others like it would underfund such programs.
New federalism has its own advantages as well:
- Because of differences among states, one-size-fits-all features of federal laws produce poor results. Decentralization accommodates the diversity that exists across states.
- By virtue of being closer to citizens, state and local authorities are better than federal agencies at discerning the public’s needs.
- Decentralized federalism fosters a marketplace of innovative policy ideas as states compete against each other to minimize administrative costs and maximize policy output.
Which model of federalism do you think works best for the United States? Why?
LINK TO LEARNING
The leading international journal devoted to the practical and theoretical study of federalism is called Publius: The Journal of Federalism.
3.3 Intergovernmental Relationships
By the end of this section, you will be able to:
- Explain how federal intergovernmental grants have evolved over time
- Identify the types of federal intergovernmental grants
- Describe the characteristics of federal unfunded mandates
The national government’s ability to achieve its objectives often requires the participation of state and local governments. Intergovernmental grants offer financial inducements to get states to work toward selected federally decided goals. A grant is commonly likened to a “carrot” to the extent that it is designed to entice the recipient to do something. On the other hand, unfunded mandates impose federal requirements on state and local authorities. Mandates are typically backed by the threat of penalties for non-compliance and provide little to no compensation for the costs of implementation. Thus, given its coercive nature, a mandate is commonly likened to a “stick.”
The national government has used grants to influence state actions as far back as the Articles of Confederation when it provided states with land grants. In the first half of the 1800s, land grants were the primary means by which the federal government supported the states. Millions of acres of federal land were donated to support road, railroad, bridge, and canal construction projects, all of which were instrumental in piecing together a national transportation system to facilitate migration, interstate commerce, postal mail service, and movement of military people and equipment. Numerous universities and colleges across the country, such as Ohio State University and the University of Maine, are land-grant institutions because their campuses were built on land donated by the federal government. At the turn of the twentieth century, cash grants replaced land grants as the main form of federal intergovernmental transfers and have become a central part of modern federalism.
Federal cash grants do come with strings attached; the national government has an interest in seeing that public monies are used for policy activities that advance national objectives. Categorical grants are federal transfers formulated to limit recipients’ discretion in the use of funds and subject them to strict administrative criteria that guide project selection, performance, and financial oversight, among other things. These grants also often require some commitment of matching funds. Medicaid and the SNAP program are examples of categorical grants.
Block grants come with less stringent federal administrative conditions and provide recipients more flexibility over how to spend grant funds. Examples of block grants include the Workforce Investment Act program, which provides state and local agencies money to help youths and adults obtain skill sets that will lead to better-paying jobs, and the Surface Transportation Program, which helps state and local governments maintain and improve highways, bridges, tunnels, sidewalks, and bicycle paths. Finally, recipients of general revenue sharing faced the least restrictions on the use of federal grants. From 1972 to 1986, when revenue sharing was abolished, upwards of $85 billion of federal money was distributed to states, cities, counties, towns, and villages.
During the 1960s and 1970s, funding for federal grants grew significantly. Growth picked up again in the 1990s and 2000s. The upward slope since the 1990s is primarily due to the increase in federal grant money going to Medicaid. Federally funded health-care programs jumped from $43.8 billion in 1990 to $320 billion in 2014. Health-related grant programs such as Medicaid and the Children’s Health Insurance Program (CHIP) represented more than half of total federal grant expenses.
LINK TO LEARNING
The federal government uses grants and other tools to achieve its national policy expectations. Take a look at the National Priorities Project to find out more.
Unfunded mandates are federal laws and regulations that impose obligations on state and local governments without compensating them for the costs they incur. The federal government has used mandates increasingly since the 1960s to promote national objectives in policy areas such as the environment, civil rights, education, and homeland security. One type of mandate threatens civil and criminal penalties for state and local authorities that fail to comply with them across the board in all programs, while another provides for the suspension of federal grant money if the mandate is not followed. These types of mandates are commonly referred to as crosscutting mandates. Failure to fully comply with crosscutting mandates can result in punishments that normally include reduction of or suspension of federal grants, prosecution of officials, fines, or some combination of these penalties. If only one requirement is not met, state or local governments may not get any money at all.
For example, Title VI of the Civil Rights Act of 1964 authorizes the federal government to withhold federal grants as well as file lawsuits against state and local officials for practicing racial discrimination. Finally, some mandates come in the form of partial preemption regulations, whereby the federal government sets national regulatory standards but delegates the enforcement to state and local governments. For example, the Clean Air Act sets air quality regulations but instructs states to design implementation plans to achieve such standards.
The continued use of unfunded mandates clearly contradicts new federalism’s call for giving states and local governments more flexibility in carrying out national goals. Many also believe unfunded mandates are unfair in that they require sometimes financially fragile local or state governments to take on new responsibilities without consideration of how badly they may be affected. The temptation to use unfunded mandates appears to be difficult for the federal government to resist. This is because mandates allow the politicians in federal government to fulfill goals of their own constituents while passing most of the cost to the taxpayers of other states, an especially attractive strategy for national lawmakers who say they are trying to cut federal spending.
Some leading federalism scholars have used the term coercive federalism to capture this aspect of contemporary U.S. federalism. In other words, Washington has been as likely to use the stick of mandates as the carrot of grants to accomplish its national objectives. As a result, there have been more instances of confrontational interactions between the states and the federal government.
3.4 Advantages and Disadvantages of Federalism
By the end of this section, you will be able to:
- Discuss the advantages of federalism
- Explain the disadvantages of federalism
The federal design of our Constitution has had a profound effect on U.S. politics. Several positive and negative attributes of federalism have manifested themselves in the U.S. political system.
THE BENEFITS OF FEDERALISM
Among the merits of federalism are that it promotes policy innovation and political participation and accommodates diversity of opinion. On the subject of policy innovation, Supreme Court Justice Louis Brandeis observed in 1932 that “a single courageous state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.” What Brandeis meant was that states could harness their constitutional authority to engage in policy innovations that might eventually be diffused to other states and at the national level. For example, a number of New Deal breakthroughs, such as child labor laws, were inspired by state policies. Prior to the passage of the Nineteenth Amendment, several states had already granted women the right to vote. California’s policies have influenced fuel emissions and other environmental policies. Recently, the health insurance exchanges run by Connecticut, Kentucky, Rhode Island, and Washington have served as models for other states seeking to improve the performance of their exchanges.
Another advantage of federalism is that because our federal system creates two levels of government with the capacity to take action, failure to attain a desired policy goal at one level can be offset by successfully securing the support of elected representatives at another level. Thus, individuals, groups, and social movements are encouraged to actively participate and help shape public policy.
Federalism and Political Office
Thinking of running for elected office? Well, you have several options. As the table below shows, there are a total of 510,682 elected offices at the federal, state, and local levels. Elected representatives in municipal and township governments account for a little more than half the total number of elected officials in the United States. Political careers rarely start at the national level. In fact, a very small share of politicians at the subnational level transition to the national stage as representatives, senators, vice presidents, or presidents.
This table lists the number of elected bodies and elected officials at the federal, state, and local levels:
|U.S. House of Representatives
If you are interested in serving the public as an elected official, there are more opportunities to do so at the local and state levels than at the national level.
If you ran for public office, what problems would you most want to solve? What level of government would best enable you to solve them, and why?
Thankfully, the system of checks and balances in our political system often prevents the federal government from imposing uniform policies across the entire country. As a result, states and local communities have the latitude to address policy issues based on the specific needs and interests of their citizens. The diversity of public viewpoints across states is manifested by differences in the way states handle access to abortion, distribution of alcohol, gun control and/or access, and social welfare benefits, for example.
THE DRAWBACKS OF FEDERALISM
Federalism also comes with drawbacks. Chief among them are what detractors see as economic disparities across states, so-called ‘race-to-the-bottom’ dynamics (i.e., states compete to attract business by lowering taxes and regulations), and the difficulty of taking action on issues of national importance.
Stark economic differences across states can have a profound effect on the well-being of citizens. For example, in 2017, Maryland had the highest median household income ($80,776), while West Virginia had the lowest ($43,469). There are also huge disparities in public school funding across states. In 2016, New York spent $22,366 per student for elementary and secondary education, while Utah spent $6,953. Furthermore, healthcare access, costs, and quality vary greatly across states.
Proponents of ‘social justice’ contend that federalism has, in their view, tended to obstruct national efforts to effectively even out these disparities. However, numbers do not tell the entire story. Efficient spending of tax dollars, administrative overhead, and many other factors can wrongly skew interpretations that are based on numbers alone. In this chart showing education outcomes, Utah ranked in the top 10 while New York trailed below at number 16 – despite much higher tax spending.
Outcome or merit is a better measure of the outcomes of many governmental functions that utilize tax dollars.
The economic strategy of using so-called race-to-the-bottom tactics in order to compete with other states in attracting new business growth combined with the ever-growing unfunded federal mandates can also carry a social cost. For example, workers’ safety may suffer as workplace regulations are lifted if an unscrupulous company does not adhere to best industry practices. In some cases, the reduction in payroll taxes for employers has led a number of states to end up with underfunded unemployment insurance programs. As of January 2019, fourteen states have also opted not to expand Medicaid, as ‘encouraged’ by the Patient Protection and Affordable Care Act in 2010 (Obamacare), for fear it will raise state public spending and increase employers’ cost of employee benefits to an unsustainable extent resulting in businesses closing or laying off workers.