3.3 Why Federalism Works (More or Less)
After reading this section, you should be able to answer the following questions:
- How do national, state, and local governments interact to make federalism work more or less?
- How are interest groups involved in federalism?
- What are the ideological and political attitudes toward federalism of the Democratic and Republican parties?
When Hurricane Katrina hit New Orleans and the surrounding areas on August 29, 2005, it exposed federalism’s frailties. The state and local government were overwhelmed, yet there was uncertainty over which level of government should be in charge of rescue attempts. Louisiana governor Kathleen Blanco refused to sign an order turning over the disaster response to federal authorities. She did not want to cede control of the National Guard and did not believe signing the order would hasten the arrival of the troops she had requested. President Bush failed to realize the magnitude of the disaster, then believed that the federal response was effective. In fact, as was obvious to anyone watching television, it was slow and ineffective. New Orleans mayor C. Ray Nagin and state officials accused the Federal Emergency Management Agency (FEMA) of failing to deliver urgently needed help and of thwarting other efforts through red tape.
Hurricane Katrina was an exceptional challenge to federalism. Normally, competition between levels of government does not careen out of control, and federalism works, more or less. We have already discussed one reason: a legal hierarchy—in which national law is superior to state law, which in turn dominates local law—dictates who wins in clashes in domains where each may constitutionally act.
There are three other reasons (Nugent, 2009). First, state and local governments provide crucial assistance to the national government. Second, national, state, and local levels have complementary capacities, providing distinct services and resources. Third, the fragmentation of the system is bridged by interest groups, notably the intergovernmental lobby that provides voices for state and local governments. We discuss each reason.
Applying Policies Close to Home
State and local governments are essential parts of federalism because the federal government routinely needs them to execute national policy. State and local governments adjust the policies as best they can to meet their political preferences and their residents’ needs. Policies and the funds expended on them thus vary dramatically from one state to the next, even in national programs such as unemployment benefits (Dye, 1990; Peterson, 1995).
This division of labor, through which the national government sets goals and states and localities administer policies, makes for incomplete coverage in the news. National news watches the national government, covering more the political games and high-minded intentions of policies then the nitty-gritty of implementation. Local news, stressing the local angle on national news, focuses on the local impact of decisions in distant Washington (see Note 3.29 “Comparing Content”).
Passage of No Child Left Behind Act
The No Child Left Behind (NCLB) Act vastly expanded the national government’s supervision of public education with requirements for testing and accountability. Amid the final push toward enacting the law, Washington reporters for national newspapers were caught up in a remarkable story: the bipartisan coalition uniting staunch opponents President George W. Bush and liberal senator Edward Kennedy (D-MA) civilly working together on a bold, historic piece of legislation. Dana Milbank’s Washington Post story was typical. Milbank termed the bill “the broadest rewriting of federal education policy in decades,” and he admired “Washington’s top bipartisan achievement of 2001” (Milbank, 2002). The looming problems of funding and implementing the act were obscured in the national media’s celebration of the lovefest.
By contrast, local newspapers across the country calculated the benefits and costs of the new legislation on education in their states and localities—in particular, how much money the state would receive under NCLB and whether or not the law’s requirements and deadlines were reasonable. On January 9, 2002, the Boston Globe’s headline was “Mass. Welcomes Fed $; Will Reap $117M for Schools, Testing,” and the Denver Post noted, “Colorado to Get $500 million for Schools” (Hayward, 2002; Whaley, 2002)
Local newspapers sought out comments of state and local education officials and leaders of local teachers’ unions, who were less smitten by the new law. The Sacramento Bee published a lengthy front-page story by reporter Erika Chavez on January 3, shortly before Bush signed the law. Chavez contrasted the bill’s supporters who saw it as “the most meaningful education reform in decades” with opponents who found that “one crucial aspect of the legislation is nothing more than a pipe dream.” Discussing the bill’s provision that all teachers must be fully credentialed in four years, a staffer at the State Department of Education was quoted as saying “The numbers don’t add up, no matter how you look at them.” The California Teachers’ Association’s president called it “fantasy legislation,” adding, “It’s irresponsible to pass this kind of law and not provide the assistance needed to make the goals attainable. I can’t understand the reason or logic that went into this legislation. It’s almost a joke” (Chavez, 2002).
The second reason federalism often works is because national, state, and local governments specialize in different policy domains (Peterson, 1995). The main focus of local and state government policy is economic development, broadly defined to include all policies that attract or keep businesses and enhance property values. States have traditionally taken the lead in highways, welfare, health, natural resources, and prisons (Anton, 1988). Local governments dominate in education, fire protection, sewerage, sanitation, airports, and parking.
The national government is central in policies to serve low-income and other needy persons. In these redistributive policies, those paying for a service in taxes are not usually those receiving the service (Peterson, Rave, & Wong, 1986). These programs rarely get positive coverage in the local news, which often shows them as “something-for-nothing” benefits that undeserving individuals receive, not as ways to address national problems (Peterson, Rabe, & Wong, 1986).
States cannot effectively provide redistributive benefits. It is impossible to stop people from moving away because they think they are paying too much in taxes for services. Nor can states with generous benefits stop outsiders from moving there—a key reason why very few states enacted broad health care coverage (Rom & Peterson, 1990)—and why President Obama pressed for and obtained a national program. Note, however, that, acknowledging federalism, it is the states’ insurance commissioners who are supposed to interpret and enforce many of the provisions of the new federal health law
The three levels of government also rely on different sources of taxation to fund their activities and policies. The national government depends most heavily on the national income tax, based on people’s ability to pay. This enables it to shift funds away from the wealthier states (e.g., Connecticut, New Jersey, New Hampshire) to poorer states (e.g., New Mexico, North Dakota, West Virginia).
Taxes of local and state governments are more closely connected to services provided. Local governments depend mainly on property taxes, the more valuable the property the more people pay. State governments collect state income taxes but rely most on sales taxes gathered during presumably necessary or pleasurable consumer activity.
Tax and Budget Information for Federal, State, and Local Governments
Find more information about government budgets and taxes.
The language of “no new taxes” or “cutting taxes” is an easy slogan for politicians to feature in campaign ads and the news. As a result, governments often increase revenues on the sly, by lotteries, cigarette and alcohol taxes, toll roads, and sales taxes falling mostly on nonresidents (like hotel taxes or surcharges on car rentals) (Beamer, 1999).
The Intergovernmental Lobby
A third reason federalism often works is because interest groups and professional associations focus simultaneously on a variety of governments at the national, state, and local levels. With multiple points of entry, policy changes can occur in many ways (Anton, 1988).
In bottom-up change, a problem is first identified and addressed, but not resolved at a local level. People, and often the media, then pressure state and national governments to become involved. Bottom-up change can also take place through an interest group calling on Congress for help (Berman, 2003). In 1996, pesticide manufacturers, fed up with different regulations from state to state, successfully pushed Congress to set national standards to make for more uniform, and less rigorous, regulation.
In top-down change, breaking news events inspire simultaneous policy responses at various levels. Huge publicity for the 1991 beating that motorist Rodney King received from Los Angeles police officers propelled police brutality onto the agenda nationwide and inspired many state and local reforms (Lawrence, 2000).
Policy diffusion is a horizontal form of change (Walker, 1969). State and local officials watch what other state and local governments are doing. States can be “laboratories of democracy,” experimenting with innovative programs that spread to other states. They can also make problems worse with ineffective or misdirected policies.
These processes—bottom-up, top-down, and policy diffusion—are reinforced by the intergovernmental lobby. State and local governments lobby the president and Congress. Their officials band together in organizations, such as the National Governors Association, National Association of Counties, the US Conference of Mayors, and the National Conference of State Legislatures. These associations trade information and pass resolutions to express common concerns to the national government. Such meetings are one-stop-shopping occasions for the news media to gauge nationwide trends in state and local government.
Democrats, Republicans, and Federalism
The parties stand for different principles with regard to federalism. Democrats prefer policies to be set by the national government. They opt for national standards for consistency across states and localities, often through attaching stringent conditions to the use of national funds. Republicans decry such centralization and endorse devolution, giving (or, they say, “returning”) powers to the states—and seeking to shrink funds for the national government.
Principled distinctions often evaporate in practice. Both parties have been known to give priority to other principles over federalism and to pursue policy goals regardless of the impact on boundaries between national, state, and local governments (Posner, 1998).
So Republicans sometimes champion a national policy while Democrats look to the states. In 2004, the Massachusetts Supreme Court ruled that the state could not deny marriage licenses to same-sex couples, and officials in cities like San Francisco defied state laws and began marrying same-sex couples. Led by President George W. Bush, Republicans drafted an amendment to the US Constitution to define marriage as between a man and a woman. Bush charged that “activist judges and local officials in some parts of the country are not letting up in their efforts to redefine marriage for the rest of America” (Hulse, 2004). Democrats, seeking to defuse the amendment’s appeal, argued that the matter should be left to each of the states. Democrats’ appeal to federalism swayed several Republican senators to vote to kill the amendment.
“The American Recovery and Reinvestment Act,” enacted in February 2009, is another example. This was a dramatic response by Congress and the newly installed Obama administration to the country’s dire economic condition. It included many billions of dollars in a fiscal stabilization fund: aid to the states and localities struggling with record budget deficits and layoffs. Most Democratic members of Congress voted for the legislation even though it gave the funds unconditionally. Republicans opposed the legislation, preferring tax cuts over funding the states.
The stimulus package was a stopgap measure. After spending or allocating most of the federal funds, many states and localities still faced a dire financial situation. The federal government, running a huge budget deficit, was unlikely to give the states significant additional funding. As unemployment went up and people’s incomes went down, states’ tax collections decreased and their expenditures for unemployment benefits and health care increased. Many states had huge funding obligations, particularly for pensions they owed and would owe to state workers.
State governors and legislators, particularly Republicans, had promised in their election campaigns not to raise taxes. They relied on cutting costs. They reduced aid to local governments and cities. They fired some state employees, reduced pay and benefits for others, slashed services and programs (including welfare, recreation, and corrections), borrowed funds, and engaged in accounting maneuvers to mask debt.
At the University of California, for example, staff were put on furlough, which cut their pay by roughly 8 percent, teaching assistants were laid off, courses cut, library hours reduced, and recruitment of new faculty curtailed. Undergraduate fees (tuition) were increased by over 30 percent, provoking student protests and demonstrations.
At the local level, school districts’ budgets declined as they received less money from property taxes and from the states (about one quarter of all state spending goes to public schools). They fired teachers, hired few new ones (resulting in a horrendous job market for recent college graduates wanting to teach), enlarged classes, cut programs, shortened school hours, and closed schools.
The federal system functions, more or less, because of the authority of national over state laws, which trump local laws; crucial assistance provided by states and local governments to execute national policy; the complementary capacities of the three levels of government; and the intergovernmental lobby. The functioning of the system is being challenged by the economic woes faced by government at all levels. The Democratic and Republican parties differ ideologically about federalism, although these differences can be changed to achieve political objectives.
- How do the perspectives of national, state, and local governments complement one another? What are the strengths of each perspective?
- Why do you think Democrats are more likely to prefer to make policy at the national level? Why are Republicans more likely to prefer to leave policymaking to state and local governments?
- How did conflicts between the national government and state and local governments contribute to damage caused by Hurricane Katrina? Why do you think federalism broke down in that case?
Anton, T., American Federalism & Public Policy: How the System Works (Philadelphia, PA: Temple University Press, 1988), table 3.3.
Beamer, G. R., Creative Politics: Taxes and Public Goods in a Federal System (Ann Arbor: University of Michigan Press, 1999), chap. 4.
Berman, D. R., Local Government and the States: Autonomy, Politics, and Policy (Armonk, NY: M.E. Sharpe, 2003), 20.
Chavez, E., “Federal Teacher Goal is Blasted; Congress’ Mandate that Instructors Get Credentials in 4 Years is Called Unrealistic,” Sacramento Bee, January 3, 2002, A1.
Dye, T. R., American Federalism: Competition among Governments (Lexington, MA: Lexington Books, 1990), chap. 2.
Hayward, E., “Mass. Welcomes Fed $$; Will Reap $117M for Schools, Testing,” Boston Globe, January 9, 2002, 7.
Hulse, C., “Senators Block Initiative to Ban Same-Sex Unions,” New York Times, July 15, 2004, A1.
Lawrence, R. G., The Politics of Force: Media and the Construction of Police Brutality (Berkeley: University of California Press, 2000).
Milbank, D., “With Fanfare, Bush Signs Education Bill,” Washington Post, January 9, 2002, A3.
Nugent, J. D., Safeguarding Federalism: How States Protect Their Interests in National Policymaking (Norman: University of Oklahoma Press, 2009).
Peterson, P. E., The Price of Federalism (Washington, DC: Brookings, 1995), chap. 4.
Peterson, P. E., Barry George Rabe, and Kenneth K. Wong, When Federalism Works (Washington, DC: Brookings, 1986), 15.
Posner, P. L., The Politics of Unfunded Mandates: Whither Federalism? (Washington, DC: Georgetown University Press, 1998), 223.
Rom, M. C. and Paul E. Peterson, Welfare Magnets: A New Case for a New National Standard (Washington, DC: Brookings, 1990).
Walker, J. L., “Diffusion of Innovations among American States,” American Political Science Review 63 (1969): 880–99.
Whaley, M., “Colorado to Get $500 Million for Schools,” Denver Post, January 9, 2002, A6.