During the administrations of Presidents Richard Nixon (1969–1974) and Ronald Reagan (1981–1989), attempts were made to reverse the process of nationalization—that is, to restore states’ prominence in policy areas into which the federal government had moved 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.Allen Schick. 2007. The Federal Budget, 3rd ed. Washington, DC: The Brookings Institution.
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 some opposition from Democrats in Congress, moderate 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 (a Great Society-era program) 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.Dilger, “Federal Grants to State and Local Governments,” 30–31.
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.United States v. Lopez, 514 U.S. 549 (1995). 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 broad interpretation of the commerce clause that by the 1960s allowed it to regulate numerous local commercial activities.See Printz v. United States, 521 U.S. 898 (1997).
However, many would say that the years since the 9/11 attacks have swung the pendulum back in the direction of central 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).
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” (Figure): “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.”Morton Grodzins. 2004. “The Federal System.” In American Government Readings and Cases, ed. P. Woll. New York: Pearson Longman, 74–78.
Cooperative federalism has several 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 (e.g., water and air pollution controls) 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 advantages as well:
- Because there are economic, demographic, social, and geographical differences among states, one-size-fits-all features of federal laws are suboptimal. 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?
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