Outline of the Chapter
- Introduction: American Federalism and American Politics
- The American Constitution, Federalism and Policy Authority
- The Decentralized Republic: American Federalism from the Founding to the Civil War
- Reconstruction: A Failed Attempt to Complete the American Revolution
- Progressivism and Federalism, 1880s-1930s
- Federalism and the New Deal
- The Great Society and American Federalism
- The Politics of Federalism Today
- Conclusion: Varieties of Federalism in American Political Development
I. Introduction: American Federalism and American Politics↑
The Constitution of 1787 emerged out of the crisis of governance caused by the defects of the Articles of Confederation. It was based on a second revolution, a revolution that aimed to expand the power of the national government, a revolution that at the same time had to contend with a variety of competing and contrary perspectives: the egalitarian-individualist “republicans,” with their healthy respect for local and state government, and the hierarchs of the slave states who wished, above all, to protect the institution of slavery. The resulting constitutional structure—the rules that determined policy agency, policy authority, and the policy process— continues to shape ordinary politics in the United States. Yet those constitutional structures are also the subject of political dispute. So while the Constitution of 1787 corrected some of the defects of the American constitutional order, it most certainly did not bring an end to constitutional conflict. In theory, a constitution should establish the rules that allow the political game to be played; in practice, the political players spend a great deal of time arguing about the rules. In the United States, many disputes about the “rules of the game” are about federalism.
The conflicts amongst those who created the Constitution influenced the final product in numerous ways. Given the scope of disagreement amongst the participants, the fears that small states had of the larger states, and given the excesses of majoritarian democracy that occurred under the Articles of Confederation, it is not surprising that the Constitution created an inefficient legislative process. The new constitutional order featured a more powerful national government, but the legislative power of that government was made difficult to mobilize, and thus difficult to abuse. The legislative process was designed to not be very responsive to changes in public will, particularly over the short term. Instead of being based upon the will of the majority, the structure of the constitution would encourage the need for compromise and democratic deliberation.1 The history of American political development, at least in the 20th century, is a history of how the national government attempted to escape the constraints of this cumbersome process– I say “attempted,” because in the end the constitutional structure remained a key influence on the new American state that emerged over the last 60-70 years.
How is inefficiency built into the constitution? Lawmaking requires different institutions to reach agreement: the House, Senate and the President, and in some ways the federal courts. Yet these bodies are constituted in such a way that they are likely to disagree. Representatives, Senators, and Presidents are selected in different ways, at different times, with differing constituents, and thus these three institutions will all tend to have different relationships with public opinion. A Senator, with a six-year term of office, will in theory be better able to resist the temporary whims of public opinion– at least early on in their term. More importantly, the Senate as a whole will have a different perspective from that of the House because it represents regions– more specifically, it represents States– and will tend to have a different perspective on national issues than the House.2 Senators, in contrast with their colleagues in the House, will be more likely to consider policy proposals from the perspective of state governments– that is, they would consider policies in light of the issue of federalism. The selection of Senators by the states is a practice that was abolished in the early 20th century– (by 1913 to be precise, with the adoption of the 17th Amendment, though states had always been free to elect Senators if they so chose) –and this reveals one of the central dynamics of American political development: the changing relationship between the state and nation, and the changing nature of regional conflict.
The USA has gone through a series of critical episodes which have re-shaped the constitutional order, particularly in regards to federalism. We will begin by considering the sources of federalism in the American constitution, and then investigate how federalism developed from the 18th century to the 21st, moving more quickly through the first one hundred and fifty years, and spending a considerable amount of time on the New Deal era. Contemporary American politics still deals with the policy legacies and constitutional conflicts of the New Deal era, and it is impossible to understand what is happening in the early 21st century unless we understand how the American regime transformed under the auspices of Franklin Delano Roosevelt. Most American Democrats fail to understand how radical this change was; most American Republicans do not realize the extent to which they have accepted the radical changes introduced during the New Deal era.3 Yet while the New Deal changed the American state, it did not bury the old constitutional order. Understanding American politics requires us to understand how the modern or progressive state crafted during the New Deal is still shaped, for better or worse, by the institutions created by the Constitution of 1787.
We begin with a simple question: what is federalism? Federalism refers to system of government which features two levels of government that possess independent constitutional statuts; the powers of these two levels of government cannot be unilaterally changed by the other. Federal states are usually contrasted with unitary states, such as Great Britain — (we can, as of 2016, ignore the role played by the EU in Britain). When we call Britain a unitary state, this does not this mean that it has only one level of government. Various kinds of local and regional governments exist, yet those governments do not have any independent constitutional basis. The powers and structure of local governments can be reshaped by Parliament, as many left-wing local officials found out during the Thatcher administration. Federalism refers to a system in which there are not only different levels of government, but a system where at least two levels of government are constitutionally “autonomous;” the powers and governing structure of one level of government (in the American context, the state government) is not delegated from the national government, and cannot be altered by the national government. The reverse is true as well—the powers of the American national government are not delegated by the state governments, and state governments cannot alter those powers or withdraw them, as they are not the source of those powers.4 This does not mean that the relative balance of power between the different levels of government cannot be changed. Yet changes in federalism involve a kind of extraordinary politics– in many cases, changes in federalism have recreated or re-founded the American regime.
The most practical question regarding federalism appears relatively simple—how should powers be divided between national governments and sub-national governments? It is obvious that certain powers should definitely be assigned to the national government—control over foreign affairs, for instance5. There are some functions that are clearly appropriate for state and local governments—no one thinks that national governments should be responsible for garbage collection or parking enforcement. In regards to many government functions, it makes little or no difference if separate cities, states, and regions pursue their goals in different ways; we might even suspect that federalism will allow for a diverse range of policy experiments that will allow societies to consider which policies are most effective. But what if there are some kinds of policies that citizens cannot agree to disagree over? Very few people care if governments in a different state arrange driver’s licence examinations in an unusual way6—yet what if differences between sub-national governments affect more fundamental questions? This is probably the most difficult philosophical question raised by federalism: what can citizens within the same nation agree to disagree over? What areas of political life can be subjected to “laboratories of democracy,”7 and what aspects of political life must be uniform throughout an entire society?
The relative instability of American federalism is, in large part, a consequence of disagreements over what people should be able to disagree about. This becomes particularly apparent when we consider the way in which federalism intersects with the legacy of race and racism in American political development.
The development of American federalism is closely connected to the question of race in American political development. This is because the central questions of federalism—how shall power be divided? what things can citizens agree to disagree about?—have been shaped by conflicts over race, and in particular, conflicts over the status of African Americans. Desmond King and Rogers Smith argue that much of American political development can be understood as a conflict between a “white supremacist” institutional order and a “transformative egalitarian” racial order; according to this view, race has determined the goals of political coalitions, and race has determined how political coalitions understand the rules that govern political procedures—including, of course, the rules of federalism.8 One of the main goals of this chapter is to consider whether disputes over the meaning of federalism can be understood as a consequence of the commitment to either an “egalitarian transformative” political order, or a hierarchical white supremacist order.
We can see the connection between a hierarchical, white supremacist racial order and federalism in several key Constitutional provisions. To begin with, the Constitution permits the states to define citizenship—for purposes of apportionment in the House of Representatives and taxation, free citizens are counted as “one,” while all others—slaves—are counted as three-fifths of a person.9 Whether some human beings could be completely denied political and civil rights was not considered a question that required universal agreement, however much some of the Framers may have been opposed to slavery. Other provisions dealing with slavery reveal that the issue was contentious. The representatives of the slave states realized that, without adequate protections, the new federal government could easily target slavery for elimination, and the free states could collaborate to undermine slavery as an institution. To prevent the national government from limiting slavery, the slave states demanded limits on the national government’s power over commerce— and thus the Constitution prohibited the national government from eliminating the slave trade for twenty years.10 Similarly, the Constitution required that free states deliver up escaped slaves to their owners.11 Both the power of the national government and the power of state governments were thereby subordinated to the demands of the slave owning states. Whereas the Constitution, for the most part, determines how decisions are to be made, on the question of slavery it attempts to establish a specific policy bargain amongst competing groups.
But was the Constitution meant to protect the institution of slavery in perpetuity? This would be a major point of controversy, even though the answer—”no”12—is not difficult to discern. Clear answers are often irrelevant in political life; as the philosopher Thomas Hobbes observed, people would dispute over the angles of a triangle if their interests were affected by the answer. 13
Another question central to American federalism is whether the primary purpose of the federal system is to protect the autonomy or “rights” of the states, or whether the purpose of federalism was to create a national, integrated economic system. The political stakes of this question are often unclear. American progressives often regard themselves as proponents of nationalized policy-making, on the grounds that decentralized federalism not only provided protection for a white supremacist racial order, but also on the grounds that a fully developed welfare state can only be implemented at the national level. Recently, some conservative and libertarian leaning scholars have argued that the development of “decentralized” federalism over the course of American history has literally turned the Constitution upside down, placing extreme and unnecessary limits on economic freedom, and allowing interest group politics to grow at the expense of the public. According to these scholars, the American constitution aimed to establish competitive federalism—a nationally integrated economy in which states are unable to discriminate against out of state producers or out of state citizens.14 What developed instead—often under the name of “states’ rights”—was a system of cartel federalism, in which state governments remain capable of engaging in economic warfare with other states—the kind of economic warfare that the Constitution of 1787 was designed to prevent. Thus, while contemporary conservatives are often critical of national government power, the Framers of the Constitution thought that national power was necessary to protect individual rights and insure economic freedom. This does not mean that the Framers thought the national government should fund local schools, collect local garbage, hire local crossing guards, etc.— though they wanted the national government to be powerful, they thought the national government would have limits to its policy authority.
We will try to examine American federalism in light of these two crucial issues. First, how does American federalism relate to the racial institutional orders of American political life, and how has that relationship changed over time? Secondly, if the American constitution aimed to create a form of competitive federalism (as I will argue that it did) what caused the system to evolve into cartel federalism?
II. The American Constitution, Federalism and Policy Authority↑
Madison’s argument for an “extended sphere” is the starting point of American federalism. As Americans had discovered under the Articles of Confederation, a large-scale republic could only thrive if its constitutional structure was sound—if policy agency, policy authority, and the policy process were arranged to take advantage of geographic and economic diversity and prevent conflict between the states. The Constitution of 1787 certainly improved upon the Articles of Confederation, but it left many issues unresolved. Conflicts over the scope of national power in the 21st century are rooted in the ambiguous division of powers between state and nation in the Constitution of 1787. As James Madison points out in federalist paper #39, the new government was to be both federal and national in character. This is somewhat confusing for us, for he seems to be using the term “federal” in the following sense: a federal government is a union in which the primary units are the states that make up the union, whereas a national government is based upon its connection to individual citizens. Most importantly, a truly national government can act upon individual citizens directly (that is, it can enact, enforce, and adjudicate its own laws, without the mediation of the states.) The proposed national government in the Constitution of 1787 is not truly national, according to Madison, because its jurisdiction is limited; the national government does not have power to address all areas of public concern, but only those that have been enumerated in the Constitution. But this does not mean that the government is truly federal– the people are represented directly in the national government in a variety of ways, and within its limited sphere it can govern directly. The states are represented at the national level in a variety of ways as well, and looked at from this perspective, the new national government might almost be called an alliance– and of course, individual states are free to withdraw from an alliance. That particular ambiguity– whether the American Union was the creation of the people, or whether it was a kind of alliance or compact amongst sovereign states– would be resolved decisively by the Civil War. The ambiguities in the division of powers between state and nation have more significance for American politics today.
The ambiguities of American federalism can be understood in light of the main purposes of federalism in the Constitution, which can be summarized by the concept of competitive federalism. The best way to understand competitive federalism is to see it as a response to the problems of the Articles of Confederation. The Constitution encourages productive economic competition between the states—in contrast with the unproductive competition that occurred under the Articles of Confederation—because it transfers power over trade or “commerce” to the national level. Deprived of the power to regulate commerce, the states can no longer discriminate against goods, services, or people who come from other states (though they will continue to try to do this.) The Constitution also encourages competition between the states regarding public policy. Many powers—the power to regulate conduct in the interest of public health, safety, and morality, what 19th century jurists would call the “police powers” of government—would be reserved to the states, but the scope of state regulation would be limited by the existence of other states, who would be able to compete for the allegiance of citizens by offering differing arrays of public policy.15 Finally, the states are specifically prohibited from doing things that are likely to harm the long term public interest or the rights of citizens.16 These elements of competitive federalism were a response to the problem of factionalism: national power over commerce prevents state level factions from limiting trade (to the detriment of consumers and the common economic interests of the nation as a whole); decentralized policy making by the states (combined with the free movement of citizens) limits factionalism by empowering citizens to exercise the “exit option” when confronted with policies they disapprove of.
We can discern the general logic of competitive federalism in the various ways the Constitution empowers the federal government, while at the same time limiting both the states and the national government. Yet the Constitution did not eliminate all ambiguities regarding the precise scope of national and state power. The most important ambiguities of American federalism are found in three clauses from Article One, Section 8, of the Constitution (the section which enumerates the powers of Congress): the “spending” or “general welfare” clause17, the “commerce clause,18” and the “necessary and proper” clause.19 Some of the ambiguities were cleared up by the passage of time, through political practice and judicial interpretation. Yet just as disagreements over the meaning of federalism were a dividing line between the earliest American political parties—the Democratic-Republican Party of Thomas Jefferson and James Madison, and the Federalist Party of Alexander Hamilton—disagreements over federalism are one of the most important differences between Republicans and Democrats in the 21st century.
The preamble of the Constitution states that “the people” of the United States have established the constitution to promote the “general welfare.” What does this statement about the purpose of the Constitution imply about the character of federalism in the Constitution? The other reference to the “general welfare” is found in the preamble of Article One, Section Eight, which reads as follows: “The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States” What limits, if any, are attached to the power to tax and spend for the general welfare? . By the end of the twentieth century, many scholars and political thinkers assumed that the “spending clause” of Article One, Section 8, gave the national government the power to spend money on almost any aspect of public policy, a power that allows the national government to intrude into state jurisdiction through the instrument of federal grants.20 Federal grants allow the national government to shape state level policy making, because any federal grant can come with “conditions” attached to it; that is, if a state wishes to receive a federal grant, it will often have to adopt policies established by the federal government. As a condition for receiving federal support for highway construction, for example, the national government can require the states to adopt a uniform minimum drinking age. Constitutional theorists often claim this arrangement is legitimate because, while Congress might not have been granted the explicit power to regulate the drinking age, states are still free to reject the federal standards, along with the federal money, if they so choose.21 While there are still limits on these “conditional grants,” some would say that a broad interpretation of the general welfare clause, an interpretation that allows the federal government to spend money in areas outside of its jurisdiction, causes American federalism to unravel. This is without a doubt a minority opinion today; still, much can be said in its favour. Many of those who crafted the Constitution and defended it during the ratification debates rejected the claim that the spending clause granted the national government an unlimited power to spend money outside its jurisdiction. At the same time, the expansive understanding of “the general welfare” and Congress’ spending powers was also held by some of the most prominent American statesman of the 18th and 19th century.
Even thinkers who agreed that the Constitution was desirable often disagreed over the meaning of the spending clause and the significance of the term “the general welfare.” James Madison, in Federalist Paper 41, argued that the reference to the general welfare in Article One, Section 8 does not constitute an independent grant of legislative power. According to Madison, the general welfare clause is qualified by the subsequent enumeration of powers; if the reference to the general welfare in the preamble was itself a grant of power, then the subsequent enumeration of specific powers would not be necessary. Madison did not directly address the question of whether Congress could spend money in an area outside of its legislative jurisdiction—perhaps because none of the opponents of the Constitution had yet raised that possibility. Alexander Hamilton, co-author of the Federalist Papers, was the most prominent advocate of the claim that the power to spend money in the Constitution was separate from the power to legislate. According to the argument that Hamilton articulated in his “Report on Manufactures22,” the power to spend in the interest of the “general welfare” was broad and unstructured, unlike the power to legislate, which was restricted to the enumerated objects of the Constitution. A third viewpoint soon emerged as well, a kind of middle ground between the Madisonian and Hamiltonian perspectives, based upon the notion that, while Congressional spending power was broader than Congressional legislative power, the spending power must be in the general interest, as opposed to the interest of a particular place or region (a viewpoint that Hamilton himself had anticipated.)
Why do these disputes over the meaning of the spending power shape American federalism? For one very simple reason: if you interpret the Constitution along Madisonian lines, then the power of the national government to influence the states—and thus to shape the nation—will be severely constrained. Relax the constraints on national spending power, and you will change the very character of American federalism, because this will give the national government the effectual power to shape what the states do, even if, in theory, the states have the power to reject federal money and federal conditions. Stated differently, the Madisonian theory produces “layer cake” federalism, a system in which the functions of government are almost completely separated—like the layers in a cake. The Hamiltonian approach leads to “marble cake” federalism, in which the policy authority of state and national government are almost completely intertwined.23
The commerce clause states that Congress can regulate commerce among the several states, with foreign nations, and Native American tribes. The meaning of this clause is anything but simple, however. For most of American history, “commerce among the several states” meant something like “the movement of individuals and goods engaged in trade.” The New Deal revolution of the 1930s was based upon the following re-interpretation of the commerce clause: “commerce among the several states” means “any significant economic activity, or anything that might have a significant economic effect.” We can consider the significance of the New Deal era interpretation—and consider how far it diverges from the original understanding of “commerce amongst the states”– by considering the case of U.S. vs. Lopez, from 1995.24
In U.S. v. Lopez, a young man was arrested for violating federal laws which prohibited the possession of a handgun in a school zone. Mr. Lopez’s lawyers challenged the conviction, claiming that the “Gun Free School Zones Act of 1990,” which was the basis of the charge, exceeded Congress’ legislative powers. The federal government defended the law on the basis of Congress’ power to regulate commerce. We might be forgiven for wondering how carrying a gun in Texas constitutes an act of commerce amongst the several states. According to the federal government, the possession of a gun in a school zone is connected to commerce amongst the states through the following causal chain:
a) Carrying a gun in school zones can create a climate of fear in schools
b) Such a climate of fear can cause frightened students to fail to live up to their educational possibilities; as a consequence, students are…
c) …less likely to develop high or even middle class incomes; and, as a result, their limited spending power will reduce…
d) …the overall levels of interstate commerce.
If we accept this argument, we have established the basis for federal regulation of handguns.
Or have we? There are many objections to this position, most of which were brought out in the concurring opinion of Justice Clarence Thomas. The government’s interpretation of the commerce clause makes most of Article One, Section 8 utterly redundant, as many if not all of the specific powers granted to Congress in Article One Section 8 could be justified under this expansive interpretation of the commerce clause. The Founders could have saved some ink by simply writing “Congress shall have the power to regulate the economy, and anything connected to the economy,” which is to say, “Congress shall have the power to regulate everything.” In addition, the first generation of progressive thinkers in the early 20th century were in total agreement with Thomas regarding the meaning of the commerce clause. Progressives such as Woodrow Wilson thought that the Constitution granted only limited powers to the national government to regulate “the economy” or things “connected to the economy”—and this is why they thought that the Constitution had to change.
Unlike the case of the spending clause, the progressive interpretation of the commerce clause had almost no antecedents amongst the Founding generation. True, there were disagreements amongst jurists about the precise scope of the power to regulate interstate commerce, particularly as new types of issues began to emerge in the late 19th century. But contemporary disagreements over the commerce clause are not really disagreements over what the commerce clause means., Rather, the progressive position is that the commerce clause (and, in general, the limited jurisdiction of the federal government) is inadequate to address the problems faced by modern nations. Furthermore, progressives argue that judicial decisions (rather than the formal amendment process) can be used to alter the meaning of the Constitution, so as to expand the scope of federal power.25
There were controversies over the meaning of the necessary and proper clause in the first three to four decades of the 19th century, but unlike the case of the “spending clause” and “the commerce clause,” this constitutional dispute was more or less resolved by judicial interpretation. To understand the stakes of this dispute, we must consider how it relates to the broader conflict between Democratic-Republicans (the party of James Madison and Thomas Jefferson) and the Federalists (the party of Alexander Hamilton and those who followed in his footsteps, such as the great Chief Justice of the Supreme Court, John Marshall.)
The conflict between Jeffersonian Republicans and Hamiltonian Federalists in the first decade after the adoption of the Constitution had many facets. The two parties were divided over the American response to the French Revolution, and they were divided over the USA’s relationship with Great Britain. One key point of dispute was over their differing visions of the American political economy. The Federalists hoped that American industry and manufacturing could be promoted by a series of internal improvements, a protectionist trade policy, and a sound financial system. The Jeffersonians hoped to create a republic based upon small-scale agriculture, an economic goal best pursued through westward expansion as opposed to internal improvement and protectionism.26 The Jeffersonians tended to be suspicious of national power, for the simple reason that they regarded the national government as less susceptible to popular influence and popular control than state governments—they were, in other words, the heirs of the “individualist-egalitarian” ethos of American republicanism. They were also opposed to the constitutional vision of the Federalists, which they regarded as far too flexible in its approach to the enumerated powers of Congress.The political project of the Jeffersonians was successful in some ways, dominating American life for a generation, yet their approach to constitutionalism and constitutional interpretation proved inadequate, even for their own purposes.</em
The victory of the Jeffersonian Republicans27 in the election of 1800 helped to insure that their vision of a decentralized, agricultural, and expansionist republic would dominate American political life for generations. However, even though the Federalists had been defeated at the polls, and even though they barely existed as an organized political force, the constitutional vision of the Federalists would become entrenched through a series of crucial Supreme Court decisions in the first few decades of the 19th century. In contrast to the “strict constructionism” of Thomas Jefferson and his followers, the decisions of Chief Justice John Marshall would preserve and enhance the flexibility of the national power within the federal system. This can be seen in Marshall’s approach to the necessary and proper clause, as demonstrated in the famous case of McCulloch v. Maryland.28
McCulloch v. Maryland,decided in</em1819, dealt with the question of whether the state of Maryland could tax the Bank of the United States (a federally created institution.). In order to resolve this question, Marshall had to deal with one possible objection: perhaps the United States did not have the power to create the bank in the first place. According to the "strict constructionist” theory of Constitutional interpretation, the power to create a bank had not been enumerated in the Constitution, and that was the end of the matter. Chief Justice John Marshall disagreed, arguing that the “necessary and proper” clause justified any action of the government that was directly connected to its enumerated powers, and not otherwise prohibited. According to Marshall, the government could do what is “necessary and proper” in order to fulfill its legitimate ends or objects, assuming that its actions were related to the purposes enumerated in the Constitution, and assuming that those actions did not contravene any other constitutional limits on government power. The Constitution was not a legal code that spelled out every action the national government could take; it enumerated certain broad areas of national jurisdiction, but it gave Congress considerable latitude over how to achieve its objectives. The “strict construction” of national power would make it impossible for the national government to govern within its limited field of jurisdiction.
For instance, the national government had been given the power to establish a postal service. Yet it had not been specifically granted the power to make nice blue uniforms, purchase bags and donkeys, etc. Clearly, those things were acceptable– they were “necessary” for the performance of the task, in the sense of useful. Yet how does this observation relate to the question of whether the State of Maryland could place a tax on the Bank of the United States? Chief Justice John Marshall argued that, if the tax were allowed, states could control the national government; the power to tax is the power to destroy, as there are no limits in principle on the amount of taxation that could be levied by the state. Thus, the state’s tax on the Bank of America is incompatible with federal supremacy, as established by Article VI.29 Ultimately, the states cannot control a federal institution through taxation, because the powers given the federal government were granted by the people in their collective capacity, not by the states—which also implies that the states do not have the power to “opt out” of American federalism and national government policy. But what if the national government was exercising powers it did not possess? If that were the case, Marshall argued, the states could always appeal to the courts—but in this case, the Bank of the United States was a legitimate means for achieving the enumerated ends of the national government, ends assigned by the Constitution to the national government.
Marshall’s argument granted considerable flexibility to the national government in its choice of means, and he defended the idea– indirectly, in this case– that the legitimacy of the national government was not dependent upon the continuing consent of state governments. Yet it isn’t clear that Marshall’s interpretation of the other elements of federalism provided any basis for the extremely expansive interpretations of national power developed by progressive constitutional lawyers in the 20th century. Consider, for instance, Marshall’s interpretation of the commerce clause. Marshall interpreted the commerce clause in such a way as to prevent the problems of the Articles of Confederation from re-emerging: that is, he interpreted the commerce clause to prohibit trade warfare between the states (for the most part), and he interpreted it so as to allow the federal government a considerable degree of flexibility in facilitating inter-state trade. So Marshall was not a strict constructionist in regards to the commerce clause, for the simple reason that he thought a “strict construction” was an incorrect construction; his opinions provide little support for the post-New Deal understanding of congressional power to regulate “the economy” and things affecting the economy. Yet Marshall did not have to provide a decisive answer to the question “just what is interstate commerce?” because, for the most part, the federal government during the early 19th century restrained itself.
III. The Decentralized Republic: American Federalism from the Founding to the Civil War↑
The initial quarrels over the constitutional meaning of American federalism went in favour of the Hamiltonian Federalists, in part because of the sagacity of John Marshall and other Federalist judges, and in part because, once in power, devotees of Jefferson and Madison (and even Jefferson and Madison themselves) interpreted the powers of the national government in flexible ways, in contrast to what they had often asserted in theory. Yet this flexible interpretation of national power did not eliminate the power of the states. In most ways, state governments affected the day to day lives of individuals in nineteenth century America far more than the national government, and state governments were not shy about exercising their power. If one looks at economic regulation as a whole– regulations that restricted or constrained who can sell what to whom, occupational licensing, laws governing product safety, and so on– government had a bigger effect on the lives of Americans than on the lives of British North Americans. The “police powers” of government– the power to regulate conduct in order to prevent public harms, and to promote public health, safety, and morality– were almost the exclusive responsibility of the state governments. It is not too much of an exaggeration to say that the American national government in the 19th century was little more than the post office, the military, and – crucially—the federal courts. The “Jacksonian”30 era in American politics– roughly from 1828 to the start of the civil war– refers to this period of decentralized governance, a period in which the idea of a party system became firmly entrenched, and where active political participation and partisan affiliation for white male citizens became the norm. The “Federalist” judiciary developed a flexible, common sense understanding of American constitutionalism, preventing the inflexible and unworkable theory of “strict construction” from becoming part of American law. Yet in practice, the Federalist Constitution was fully compatible with Jeffersonian politics, lending credence to the claim that the Constitution was meant to be compatible with a variety of political cultures. On some issues, however, compromise was not possible.
Perhaps one of the greatest difficulties in maintaining a federal nation is the problem of reconciling differing and even opposed regional economic interests. International trade is a frequent loci of these conflicts. As Canadians, we are very familiar with this problem: for years, even decades, Canadian trade policy aimed to support the manufacturing-based economies of Ontario and Quebec, at the expense of the West and the Maritimes. It is very difficult to determine where the public interest lies when considering international trade; even if we assume that the public benefits more from free trade than protectionism, not all regions and not all citizens will benefit equally. The tensions over international trade shaped American federalism in the very early stages of its development as well, as differences over trade and tariffs led some states to assert the power to nullify federal laws. The implication of the “nullification power” was that the USA, rather than being rooted in the people of the Union, was instead based upon a compact or agreement amongst states—and thus according to the theory, the Constitution was like an international agreement. It follows that, as in the case of all international agreements, the states could decide, on their own, to withdraw from the Union if circumstances warranted it.
The proponents of nullification thought that the Constitution was a contract or compact amongst states, and that states retained the power to judge or evaluate the constitutionality of federal actions. Thomas Jefferson may have been the first person to articulate this view. In the Alien and Sedition Act crisis31, he argued that, as the national government had no power to regulate speech, it was lawful for the states to resist federal laws that attempted to limit speech. But this approach to constitutionalism, which lodged interpretive powers in the states, was a recipe for chaos, as it would leave the Constitution without any final and authoritative interpreter.32 The nullification doctrine33 was decisively repudiated by the national government during the course of South Carolina’s resistance to federal trade laws, a challenge that Andrew Jackson rebuffed with the threat of military force. While Jackson agreed that federal power should be limited, he did not think that states had the power to unilaterally resist valid federal laws; Jackson favoured state governance, but he also believed in the Union. Yet the underlying over the “compact theory” of the Constitution was far from resolved.
The question of slavery was closely related to the question of American federalism, though it was an issue that was analytically distinct from the question of nullification and states’ rights. The major parties of the mid-19th century– the Democrats and the Whigs– had agreed, for the most part, to keep the national government out of controversies over slavery. This depended upon the willingness of the national parties to maintain a balance between the slave states and free states that were created as the USA expanded to the West. It is difficult to survey all of the various explanations as to why the compromise over slavery broke down. Moral opposition to slavery grew stronger amongst a segment of the white population; many other white Americans, particularly new immigrants and settlers in the west, were opposed to slavery on the grounds that it threatened to drive down the wages of workers. It is difficult to measure with any precision which force played the largest role. It is even more difficult to identify the factors which led white “individualists” and “egalitarians” to reject compromise with slavery. The abolitionist movement itself cannot be explained without taking into account the force of religious beliefs—the movement against slavery was part of a general religious revival or “great awakening” amongst American evangelical Christians. Other individuals recognized that government by consent, and ultimately free government of any kind, was incompatible with the existence of slavery. This was the position articulated by Abraham Lincoln. Evangelical Christianity provided a motivating force– and the “ground troops”– for classical liberals, who had previously been willing to compromise with slavery in order to reap the advantages of the national union. Yet despite the growing moral opposition to slavery in the north, it was slavery’s defenders who were responsible for making compromise over the issue impossible.34
The event that made continuing compromises over slavery impossible was the Dred Scot35 decision of the Supreme Court. It is important to note this case, as it illustrates the relationship between “states’ rights” and slavery, and this relationship is easily misunderstood. The position of many scholars is that the southern states defended a “decentralized” theory of American federalism– they were simply products of the Jacksonian-Jeffersonian consensus in favour of “states’ rights.” However, the decision by Justice Taney in the Dred Scott case is one indication that, for its defenders, the defence of slavery and the defence of racial hierarchy trumped all other constitutional and political considerations. The Dred Scott decision, in essence, declared that the American national government could not confer citizenship upon slaves; it raised some serious questions as to whether slaves could be prohibited in federally controlled territory, and even whether “free states” could interfere with the property of slave owners who came to their states. In other words, the Dred Scottdecision was a defence of slavery and racial hierarchy– it was not primarily a defence of states’ rights. If free states and the national government had no ability to confer citizenship upon African Americans, then the compromise over slavery could not continue; if free states could not exclude slaves from the territories, then the compromise over slavery could not continue; if the national government could not prevent the expansion of slavery in the territorial acquisitions of the United States, then the compromise over slavery could not continue.36
Why is it important to understand the constitutional questions at stake surrounding slavery and the Dred Scott case? Dred Scott illustrates some of the key controversies over the meaning of constitutionalism. Today, there are essentially two visions of constitutionalism (and thus, two visions of federalism) in American political life: constitutionalism based upon the original meaning of the constitution, and constitutionalism based upon an evolutionary-progressive understanding of constitutional change.37 There are many good reasons for accepting as a fait accompli the notion of evolutionary-progressive-living constitutionalism. That the Constitution should be more or less subtly adjusted by courts has been accepted, whether consciously or not, by almost every American. (e.g. every Tea Partier in the USA who has cashed, or plans to cash, a social security cheque, is an advocate of “living” or “evolutionary” constitutionalism.)
However, it is probably incorrect to use the Dred Scottas a cudgel to bludgeon constitutional originalists. This is because the Dred Scott decision was an example of “living constitutionalism,” or at least “creative constitutionalism.” Keep in mind the basic conclusions of the Dred Scott decision: Congress could not restrict the possession of slavery in its territories, and thus could not prevent or limit the expansion of slavery, and free states could not confer citizenship on African Americans. These interpretations went against the actual political practices of the national government, practices which went back to the time of the founding. The author of the majority opinion, Chief Justice Taney, assumed that he understood the meaning of the Constitution better than those who created it. If you want to find examples of constitutional originalism in the Dred Scott decision, you must turn to the dissenting opinions of Justices Curtis and McLean. Curtis and McLean argued– correctly– that African Americans had been conferred citizenship since the inception of the Constitution (though obviously not in all states), that Congress had plenary legislative power in the territories, and that Dred Scott was thus a free man.
One benefit of the majority opinion in Dred Scott was that it made it obvious that compromises with slavery were no longer possible– the constitutional inventiveness of Chief Justice Taney signalled that the slave states were not willing to accept the old compromise of American federalism, where the national government simply left slave states alone while taking (modest) steps to prevent slavery’s expansion. This means that the “refounding” of the Civil War was more of a rededication or restoration of American constitutionalism, as opposed to a radical disjunction. In a way, the Civil War attempted to fulfill the promise of the Declaration of Independence by eliminating the various compromises with slavery found in the Constitution, and by quashing the truly revolutionary innovations introduced by the Dred Scottdecision and the proto-totalitarian southern states. This attempt to bring the constitutional and political order in line with the fundamental principles articulated in the Declaration was a failure, however– the war was won by the Union, but the subsequent battle to reconstruct the constitutional and social order was lost.
IV. Reconstruction: A Failed Attempt to Complete the American Revolution↑
The Civil War Amendments– the 13th, 14th, and 15th Amendments to the Constitution– were adopted not only to bring slavery to an end, but also to expand the power of the national government to protect the civil rights and voting rights of freed slaves. These amendments appeared to give Congress the power to create and enforce national laws that would prevent discrimination on the basis of race– or on the basis of any other arbitrary characteristic—and thus they constitute the most significant extension of national legislative authority since Americans ratified the Constitution. But the promises of the Civil War Amendments were not fulfilled, primarily due to a lack of political will. The disputed election of 1876 was resolved by Congress in favour of the Republicans, but this required the Republicans to agree to end the “reconstruction” of the South– that is, federal troops were removed from the south, and federal attempts to protect the civil rights and voting rights of blacks more or less came to an end. Essentially, white citizens and white elites in the North were not willing to pay the costs of establishing democracy in the southern states, and as a consequence, the Democratic party– at that time, the party of slavery and segregation– would maintain one party rule through most of the south for close to a century.38
There were other sources of opposition to the Civil War “refounding.” The American Supreme Court, just as it had tried to limit the power of elected governments to stop the expansion of slavery in the Dred Scott case, attempted to erase the Civil War Amendments through constitutional interpretation. Most importantly, a series of decisions in 1883 struck down the Civil Rights Act of 1875, a law which prohibited private acts of discrimination against African Americans. Simplifying only somewhat, the majority of the justices on the Supreme Court argued that the civil war amendments only empowered the national government to legislate against discriminatory state actions– this was called the “state action” doctrine. This meant that, while the federal government could stop state governments from preventing you from voting, if a group of private citizens put on white hoods and formed a terrorist organization in order to keep you from voting, the federal government had no jurisdiction.
Thus, through a combination of judicial inventiveness and power politics, one party rule was gradually restored in the South– the “Dixiecrat” wing of the Democratic Party would dominate most southern states until well into the twentieth century, maintaining a non-democratic form of one party rule and segregation through legal chicanery, official acts of discrimination, and unofficial acts of violence and suppression.
This legacy of post-Civil War repression matters for all kinds of reasons, but let me stress one possible consequence regarding federalism. According to one stream of thought, the power of white supremacy in the post-Civil War south illustrates the greatest failure of American federalism, and the achievement of the civil rights movement in the 1960s illustrates the absolute moral imperative to accept “living constitutionalism,” particularly in relation to issues of federalism. How so? The argument is as follows: without re-conceptualizing American federalism and constitutionalism– without “living constitutionalism”– the national government would not have been able to intervene into southern politics in the 1960s, in order to promote voting rights, civil rights, and civil liberties for African Americans. To support the original meaning of American federalism in the 1960s was to support segregation and white supremacy; by implication, to support the original understanding of federalism today is to invite a return to the pre-civil rights era, to subject minorities to the potential tyranny of state level majorities.
One thing is certain: were they available for comment, the framers of the Constitution would accept that, through formal amendment after the Civil War, the American national government was granted the power to pass laws to insure the end of slavery and involuntary servitude, to provide equal of the law and due process of law, and to protect voting rights of all citizens of the United States. These Congressional powers were undermined by the creativity of the American Supreme Court, which invented the “state action” doctrine to limit the ability of the national government to protect the civil rights of African Americans, particularly in the post-Confederate South. It would be wrong, of course, to blame the courts alone. The Republican Party may well have abandoned reconstruction without any judicial promptings, as it was difficult, costly, and they had the ability to win control of Congress and the Presidency without any need to extend democracy to the south. Given these developments, the post-Civil War era in many ways began to look like the pre-Civil War era, at least in terms of federalism. Slavery ended, and party competition was quickly coming to an end in the “Solid” Democratic South, but in many ways governance remained within the broad patterns of the Jeffersonian-Jacksonian era. But change, as they say, was afoot.
V. Progressivism and Federalism 1880s-1930↑
In the late 19th and early 20th century, there was increased pressure on the federal government to intervene into areas that had traditionally been seen as part of state jurisdiction. Similarly, there was increased pressure on state governments to expand their traditional regulatory activities, in order to counteract the most virulent consequences of industrialization and urbanization: industrial accidents, labour disputes, diseases and disorder that came from urban overcrowding, and so on. There were two basic ways of addressing these problems of the modern industrial order. First, let us consider the perspective of the “political machines.”
The term “political machines” refers to the local party organizations that dominated urban politics in most large American cities in the late 19th century and the early 20th century– in many places, Chicago for instance, “machine politics” remains a central part of the urban landscape. Thus the urban political machines were on the frontline of modernity, addressing many problems that continue to plague cities today: unsatisfactory housing and working conditions, urban violence, the difficulties of integrating and accommodating a wide variety of immigrant groups, economic and social dislocation, etc.
But what are these “political machines”? A political machine is an organization which pursues public office through the disbursement of material incentives. In other words, a political machine encourages and maintains political support and political participation by giving direct, concrete benefits to its supporters– if you decline to give adequate support, then you will forgo those benefits. To be blunt, political machines used political office to distribute resources to their supporters. Machine politicians would, for instance, distribute turkeys and coal at Christmas to their supporters– while party insiders would reap much more significant rewards in the form of official positions, and the opportunity for various forms of graft. For new immigrants, the offer of turkeys and coal might have been insignificant from an economic perspective, but as tokens of friendship and even respect, they were probably invaluable. Above all, the machines were very effective at integrating new immigrants into the American political system– in the sense that they were effective at getting new immigrant groups to be devoted to the machines. (Machine politicians used to refer to “delivery wards” and “newspaper wards;” the former referred to the wards that could be delivered to the machine– typically the abode of immigrants, while the latter referred to upper class wasp-y wards where people actually took the recommendations of newspaper editors seriously.)
What do these urban political machines have to do with federalism? Americans in every large city experienced “machine politics” as the central focus of political life; the political party machine was more important than “the state.” Progressivism attacked everything that the machines stood for– in particular, localism, amateurism, and corruption. Many progressives thought that the problems of modern, urban existence could only be resolved by eliminating the localistic character of governance. This meant that the power of urban machines had to be undercut; it also meant that government policy had to be administered by a permanent class of civil servants, selected on the basis of merit and expertise. In regards to many issues, however, it would not be enough to challenge the political prominence of urban machines; it would also be necessary to expand the regulatory capacities of the national government.
For most progressives, the scale of economic problems — and the scale and size of modern corporations– required a more proactive national government; they argued that the national government had to take on some of the “police powers” that had formerly been exercised by the states. The late 19th century witnessed some slow but significant extensions of federal regulatory power, but Congress attempted to fit these new laws within the existing framework of federalism. Congress adopted regulatory legislation aimed at inter-state railroads and large, multi-state corporations– that is, they tried to regulate organizations whose activities seemed most closely connected to “inter-state” commerce—but national laws did not attempt to regulate intra-state economic activity.
Consider the example of the Interstate Commerce Act of 1887, which attempted to regulate the rates of railroad companies—companies which were often in a position to establish monopolies, and thus to more or less bankrupt the businesses and farmers who were dependent upon railroad shipping (in some situations, the problem was the opposite: competition led to “instability” and the breakdown of rail transportation) . States were incapable of regulating railroad companies with any degree of effectiveness, not least because it was usually easy for the railroads to bribe state politicians. More importantly, the Supreme Court’s approach to the commerce clause– which prohibited states from creating laws that had more than an incidental or indirect effect on interstate commerce– led to the striking down of many state railroad laws as unconstitutional. The new Interstate Commerce Commission encountered some constitutional difficulties of its own, however. The Supreme Court ruled that, as an executive branch agency, the commission could not on its own set railroad rates. That was a legislative power, and that power could not be delegated to the executive branch. Nevertheless, the Interstate Commerce Commission was one attempt to fit national regulatory power within the existing division of powers established by American federalism. To some extent, then, progressive ambitions were compatible with the established constitutional structure.
In other cases, however, the Constitution appeared to place major restrictions on the progressive agenda. Consider another major economic policy of the late 19th century: the Sherman Anti-Trust Act. This law was meant to deal with the problem of trusts– organizations which aimed to evade various state restrictions that tried to limit corporate monopolies. The Sherman Anti-Trust Act was directed against unfair trade practices that related to commerce in goods between or among the states; the law could not be used to break up companies merely because they were large. So, for instance, in the “sugar trust” case (United States v. E.C. Knight Co., 1895) the federal government attempted to break up the American Sugar Refining Company, on the grounds that its contracts with its constituent corporations gave it control of 90% of the sugar market. The Supreme Court ruled that this was an attempt to regulate production– an activity purely internal to a state– as opposed to a regulation of interstate commerce. This decision has been criticized on the grounds that the distinction between commerce and production is artificial; after all, most goods that are made in one state will, at some point, enter into the national stream of commerce. On the other hand, the regulation of production of goods had fallen under state jurisdiction since “time immemorial;” more importantly, the established doctrine was that the “interstate commerce clause” gave exclusive power to the national government. If the national government could regulate production, then it might open the door to all kinds of challenges to state regulation of economic activity.
The EC Knight case illustrates the kinds of conflicts that were emerging over the scope of federal power, conflicts between Progressive advocates of national regulation, and the defenders of the traditional understanding of Congress’ enumerated powers. The defenders of the established constitutional order were often (though certainly not exclusively) found in the federal courts– lawyers and judges were amongst the most conservative strata of society. Federal courts were in many cases unwilling to accept the emergence of a federal “police power,” a general power to protect the health, safety, welfare, and morality of the populace, general powers of government that had always found their home in the states (or local government.)
Let us consider another example of the conflict between progressive aspirations and conservative– or perhaps, “classical liberal”– jurisprudence. The Federal Child Labor Actof 1916 prohibited the shipment in interstate commerce of goods produced in factories employing children under the age of 14. States clearly had the power to establish a minimum working age law, but each set it differently. North Carolina law allowed you to work at age 12, and Roland Dagenhart wanted his two 12 year old sons to keep working at the cotton mill. He sought an injunction (an order to stop the enforcement of a law) in federal court. In the case of Hammer v. Dagenhart (1918) the United States Supreme Court ruled in his favour. “Hammer” in this case, refers to W.C. Hammer, U.S. Attorney for the Western District of North Carolina– which is just an awesome name for a government lawyer.
Why did the Supreme Court rule in Mr. Dagenhart’s favour? The federal courts had previously allowed Congress to prevent the movement of liquor, diseased cattle, and prostitutes in interstate commerce. Why couldn’t Congress prevent the movement of goods made by child labour? The court argued that, in these other instances, the harm was actually caused by the movement of goods itself. In this case, the harm was caused through the act of production itself, and therefore fell under state jurisdiction. The dissenters and critics argued that this distinction was artificial; the court simply should not evaluate the reasons congress might have for limiting the movement of goods in interstate trade. The problem with this position was that, if the courts could not evaluate the reasons or goals behind the exercise of the commerce clause, then the commerce power could be potentially used to displace state regulation entirely. Chief Justice John Marshall himself had argued that courts can permit considerable flexibility in the national government, if, and only if, the ends pursued by the national government are constitutionally justified.
It is easy to exaggerate the scope of judicial opposition to progressive regulation. Some scholars even argue that decisions such as Hammer v. Dagenhart were motivated not by constitutional doctrine, but by economic preferences– that is, the preference of elite lawyers for “laissez faire” economics, if not Social Darwinism. That claim is almost entirely false. Most new economic regulations enacted at the state level during the late 19th and early 20th century were upheld when challenged in federal courts. Nevertheless, more serious challenges were coming. The severe economic upheaval caused by the Great Depression of the 1930s–and the potential for cataclysmic political upheaval– led the federal government under FDR to experiment with a vast new array of policies. A slim majority of the court opposed the most audacious of the New Deal’s projects. But those judges started to die (of old age, of course), and some of them started to change their mind. As FDR’s appointees took their place on the Supreme Court, they revolutionized constitutional doctrine and laid the basis for the modern administrative state, and the modern form of American federalism.
VI. Federalism and the New Deal↑
In most general terms, the New Deal can be understood as the triumph of progressivism in American politics39— though triumph might be an inappropriate term, as it implies that all ideological adversaries were vanquished. Despite the electoral victories of some progressives in the early 20th century– Theodore Roosevelt, the progressive Republican, and Woodrow Wilson, the progressive Democrat– and despite some significant changes in public policy, the most significant victories for progressivism at the national level had to await the arrival of very special political circumstances, in particular, the financial crises of the late 1920s and the Great Depression of the 1930s.40 Many New Deal policies provoked a good deal of resistance from the Supreme Court, often on the grounds that the New Dealer’s innovative responses to the Depression were not based upon the enumerated powers of the national government. By the 1940s, however, it appeared as if the progressive version of federalism had won the day. The Court, now filled with FDR appointees, lifted many of the restraints that constitutional doctrine had previously placed upon both the national and state governments. The problem, as we will see, is that this progressive revolution has never been fully accepted by American polity as a whole. Unlike some other changes in national policy authority, such as the 16th amendment, the changes that occurred during the New Deal were never authorized through the process of formal constitutional amendment. As a result, Americans live with a kind of constitutional multiple-personality disorder; there is both a pre-New Deal constitution and a post-New Deal constitution, each creating a different version of the ground-rules of American politics, particularly regarding federalism.41
The concepts of “competitive federalism” and “dual federalism” explain the main features of the pre-New Deal order. Dual federalism refers to the division of powers between the federal government and the state governments, and the original constitutional order envisioned a form of government in which there would be relatively little overlap between the different levels of government; for every problem, one government would be responsible. The Constitution creates “competitive federalism” by placing severe restraints upon state governments, preventing them from erecting barriers to trade and the movement of citizens across states lines, as well as preventing states from discriminating against citizens and businesses from other states. In addition, the Constitution deprived states of the ability to repeat the disastrous economic and political practices that undermined the Articles of Confederation; thus, the Constitution prohibits states from creating their own paper currency, and it prevents states from passing ex post facto laws or laws that abridge the obligation of contracts. Some of the key elements of competitive federalism are explicitly enumerated in the Constitution, yet some elements were plausible deductions from the structure of the Constitution. Of particular importance is the doctrine of federal exclusivity—according to this doctrine, if a power has been granted to the federal government, then the power belongs to the federal government alone. By granting the federal power to regulate commerce amongst the states, for instance, the Constitution deprives states of the power to regulate trade between states; “free trade between the states” becomes the constitutional base-line or starting point.42
Progressive, post-New Deal constitutionalism abandoned the notion that the national government had limited powers; it relaxed many of the constraints on state governments; and it permitted “marble cake federalism,” the complex intertwining of state and federal jurisdiction. This vision of constitutionalism cannot be understood in terms of the “centralization of power;” in some ways, the power of the national government vis a vis the states was reduced in the New Deal Era. What did develop was a form of federalism which allowed the national government to re-distribute resources amongst the states, and which permanently intertwined the responsibilities of both levels of government. “Co-operative” federalism did not simply displace the older vision of competitive federalism—the dispute over which version of federalism is appropriate for a modern economy remains unresolved. Perhaps it can never be resolved, as these two visions of federalism are rooted in differences over the very purpose of government.
The conflict over federalism in the American political order entered a new phase during the Great Depression, and the transformation of federalism has to be seen in light of other political developments that were occurring during the same period. In terms of its political effects, the Great Depression gave the Democratic Party an opportunity to expand its electoral coalition. FDR benefitted from the continued existence of one-party rule in the “Dixiecrat” South43, and he expanded the base of the Democratic Party by winning support from African Americans and urban workers. A generation earlier, the Democrats had been the party of the agricultural populists and segregationists; it still retained the loyalty of those voters, but it had now solidified its status as the party of choice for black and white urban workers in the North.44
The new policies enacted by FDR and the “New Deal” Democratic party had two central aims: first, to provide a national welfare safety net, and secondly, to “manage” economic competition so as to restore stability and economic prosperity. One of the main goals of the New Deal– the creation of social safety net– proved to be enormously popular, enduring, and successful. The Social Security Act of 1935 was the most important, and most enduring, of FDR’s attempt to create a permanent federal welfare state. The Social Security Act is arranged under separate “titles” (a title is a subsection of American law); old age insurance and assistance, unemployment compensation, “aid to families with dependent children,” aid for maternal and children’s health, public health provisions, and aid for the blind. The most important thing to note, in terms of how these policies relate to the development of American federalism, is that the national government did not attempt to implement all of these policies directly. Many titles (though not all) were framed in order to induce the states to adopt and implement various aspects of the policies, though of course the national government would make sure that it controlled many details of policy implementation. This policy structure—shared or overlapping federal-state jurisdiction, otherwise known as “co-operative” or “marble cake” federalism– was a result of the uncertainty over whether the federal government had the power to enact these policies directly.
For instance, the national government used the “tax offset” technique in order to induce the states to adopt the national unemployment insurance system. A federal tax was imposed on employers, and the tax was then removed if the states imposed their own tax and established their own unemployment insurance system. States could also receive federal funds– assuming that they met federal standards, which included relatively detailed control of state bureaucratic agencies. What we see here is the emergence of “marble cake federalism”: the role of the federal government and the states became intertwined, with the federal government providing the policy initiative and a variety of financial incentives and inducements, while at the same time attaching conditions to grants and tax offsets in order to create national policies that are administered by the states.45
The question is whether this arrangement comported with the division of powers in the Constitution. The answer is almost certainly yes. While there are many valid political reasons for opposing marble-cake federalism, the power of the federal government to spend money outside of its jurisdiction been an accepted part of American federalism long before the New Deal. There is a story that Frances Perkins, FDR’s Secretary of Labour and the first woman appointed to the U.S. cabinet, once had an informal lunch with the Chief Justice of the Supreme Court, Justice Harlan Fiske Stone. Several aspects of the New Deal had already been struck down by the Supreme Court at this point46. The Chief Justice Stone had some advice for Secretary Perkins: “the taxation power, my dear, the taxation power; almost all of your objects can be achieved through the taxation power.” It was advice that the New Dealers took to heart. Even if the national government could not regulate directly, it could use taxation and spending measures to induce the states to create new quasi-national policies.
The main tool used by the federal government to pursue national objectives in areas of state jurisdiction are conditional “grants in aid.”. While there are a bewildering number of types of grants, there are two general categories: categorical grants (grants of money for a very specific purpose, usually with a large number of conditions attached) and block grants (grants for more general purposes, which usually leave states a broader degree of discretion in how the money is used.) The use of the federal spending power has forever blurred the division of powers between state and federal governments. While the structure of the Constitution seemed to be based on the premise that state and federal governments would have separate responsibilities, the letter of the Constitution—in particular, the taxing and spending provisions of article one, section 8– create an opening for federal influence over policies that fall within state jurisdiction. Thus the growth of the national government’s policy agenda during this period did not displace or weaken the states, but rather caused the two levels of government to become intertwined.
The Social Security Act is the most enduring and most popular legacy of the New Deal (though some parts of it– old age insurance– have proven to be much more popular than others). The attempt to create a form of “managed capitalism” proved to be much more ambiguous, and much more controversial from a constitutional perspective. The federal government enacted laws to stabilize the financial sector47, provide overtime and minimum wage laws to protect the most vulnerable workers48, and normalize the relationship between management and workers through unionization laws.49 All of these laws depended upon a new interpretation of the scope of federal power under the commerce clause. The commerce clause was interpreted to cover any form of economic activity that might affect interstate commerce. The problem was that, once you adopt this mode of reasoning, it difficult to determine what kinds of activities are not covered by the commerce power of the federal government.
To give an example: the Agricultural Adjustment Act was established to stabilize the agricultural sector of the economy, which meant that the regulations adopted under the AAA aimed to maintain a floor for agricultural prices. This is based on the economic theory that, during a time of widespread poverty and unemployment, it is vital that the price of food not decline too precipitously. In order to maintain “stable prices,” the Agricultural Adjustment Administration imposed marketing quotas on farmers—thereby insuring that prices would be maintained at a higher level. This policy was challenged in a federal case that went to the Supreme Court in 1942, Wickard v. Fillburn. Fillburn brought a suit against the Secretary of Agriculture; he wanted to prevent a marketing penalty from being imposed upon him for violating his marketing quota. What was Fillburn’s crime? He had grown excess wheat to feed his animals. His argument was that this action was utterly unrelated to interstate commerce, and the federal District Court of Appeals ruled in his favor. A unanimous Supreme Court reversed this decision.
How is feeding wheat to your own pigs, or using the wheat you have grown to feed your family, part of “inter-state commerce,” and therefore something that can be banned by the federal government? The answer given by the Supreme Court was that “the stream of commerce” amongst the states encompassed activities that were not, in themselves, “commerce amongst the states.” For example, the court upheld various regulation of labour unions, on the grounds that strikes and conflicts between management and labour (particularly in large, integrated firms that spanned multiple states) could disrupt trade and economic activity in multiple states. Whereas the courts during the late 19th and early 20th century had tried to maintain a distinction between production (which falls under state jurisdiction) and commerce, the economic conditions of the 20th century, and the forms of economic organization that spanned the nation, made that distinction appear unworkable.
The change may have been less revolutionary than it first appears, however. The “stream of commerce” doctrine had been anticipated by a long series of judicial decisions which had extended the scope of federal power under the commerce clause in order to prevent state governments from engaging in various forms of economic protectionism and discrimination.50 Yet if courts could supervise state police powers under the aegis of the commerce clause, then so too could Congress. Even though many New Deal policies seem absurd—most policy analysts today regard the price raising schemes of the Agricultural Adjustment Act as ill-conceived—this does not mean that those policies were unconstitutional.
The direct regulation of economic activity during the New Deal period raised more serious policy questions than the attempt to establish a welfare safety net. The national government’s attempt to manage economic outcomes, stabilize prices, and protect various firms and industries from the consequences of competition, created unprecedented opportunities for large economic interests– whether in agriculture, industry, finance, etc.– to influence and shape government policy to their own advantage. In the Wealth of Nations, the philosopher and economist Adam Smith observed that wherever you have a group of businessmen in the same trade together in a room, before long the conversation will turn to defrauding the public. We can extend this image by saying that when the representatives of big business and big government sit down at the table, before long they will try to consider how to protect big business from the forces of competition (and the consequences of their own stupidity.)
Whatever the ultimate economic and political consequences of the New Deal, the constitutional consequences appeared to be relatively clear. The Supreme Court had interpreted the commerce powers of the national government in an extremely expansive way, and the Court appeared unwilling to impose any serious restraints upon the spending power of the national government. But while the Court was willing to accommodate the growth of national power, it also adopted doctrines that enhanced state power.
To begin with, the Court began the long, tortuous process of replacing the doctrines of federal supremacy and federal exclusivity with the murky doctrines of “federal pre-emption.” If Congress’ commerce power extends to all economic activity, then the old doctrines simply could not be applied in quite the same way—the state governments would be put out of business in relation to economic regulation. In practice, this meant that while the federal government could establish regulatory “floors” (minimum standards), states were free to impose additional standards. This is an excellent example of the ways in which progressive constitutionalism enhanced the power of state governments.
The doctrine of federal exclusivity stipulated that, if the federal government had the power to regulate something under the commerce clause, then state governments had no jurisdiction. During the New Deal era, this doctrine was replaced with the notion of federal pre-emption—states and the national government can regulate within the same field, as long as the regulations are not logically incompatible. Courts became more willing to accept protectionist state regulatory schemes, such as milk price controls that were intended to protect the New York dairy industry from its out of state competitors. In addition, while federal courts could not eliminate federal diversity jurisdiction (cases between citizens and corporations from different states), they did abandon the notion of a federal “common law” that could be used to settle inter-state disputes. What this meant was that federal courts would have to apply state law, and states would be free to craft their own laws in the hopes of benefitting their own citizens and industries. Finally the courts were less willing to uphold direct Constitutional restrictions such as the “contracts clause” or the “due process of law” clause against the states.
In some ways, the New Deal-Progressive political project could be reconciled with the established constitutional order. Many of the most significant policies of the New Deal, however novel they may appear, did not require radically new conceptions of the Constitution, because courts had already developed a fairly broad interpretation of the national government’s power to regulate (under the commerce clause) and its power to spend (in areas outside of its enumerated jurisdiction. Yet the court began chipping away at the various Constitutional provisions and doctrines that had been at the basis of “competitive federalism,” thereby expanding the powers of state governments.
VII. The Great Society and American Federalism↑
The next major stage in American Political Development, and the development of American federalism, coincides with the Presidency of Lyndon Johnson from 1963 to 1968 — his attempt to extend the “New Deal” is called the era of “The Great Society51.” What is meant by this? Through laws such as the Civil Rights Act and the Voting Rights Act, the policies of Great Society progressivism aimed to complete those aspects of reform that had been hampered by the interaction of “ascriptive hierarchy” and federalism in American politics. In addition, the Great Society era was a response to what we might call “quality of life” issues, as opposed to the economic and redistributive focus of New Deal policy and regulation. The federal government, particularly after the massive electoral victory of Lyndon Johnson in 1964, enacted a sort of “Second Reconstruction”: the federal government attempted to intervene into state politics in order to combat state-enforced racial segregation and private discrimination. The Civil Rights Act of 1964 prohibited discrimination in employment and public accommodations; the Voting Rights Act of 1965 (though enormously complicated) attempted to remove obstacles to voting for African Americans, particularly in the South. The Elementary and Secondary Education Act of 1965 used the spending power of the national government to put direct pressure on Southern schools to desegregate– the federal government increased education spending, but required states to adopt good faith efforts to end segregation in education if they wished to benefit from Federal largesse.
While these policies raised some problems in relation to federalism, in many ways they were less problematic (from a constitutional perspective) than many economic regulations that were at the center of the New Deal. After all, the 14th Amendment seemed to grant Congress the direct power to create laws to protect individuals against racial discrimination. Unfortunately, the Supreme Court was unwilling to overturn the “state action” doctrine.52 Instead of overturning the state action doctrine and adopting the most obvious interpretation of the 14th Amendment, the Supreme Court used the new interpretations of “the commerce clause” to uphold various aspects of this second Reconstruction. It was easy to understand why they adopted this approach, as previous decisions had interpreted the commerce power so broadly that you could steer an aircraft carrier through it. But consider the problem that this creates. If the court had overruled the state action doctrine, the national government could have based the Civil Rights Act on the power of Congress to make laws to insure ‘equal protection of the law,’ as per Section 5 of the 14th Amendment. By relying on the commerce clause, the government now had to defend anti-discrimination laws on the grounds that that racial discrimination affected interstate commerce. I submit to you that racial discrimination is wrong, regardless of whether or not it affects interstate commerce.
The consequences of basing civil rights laws on the commerce clause were not particularly severe, though this did lead to some utterly ridiculous Supreme Court opinions (ridiculous in regards to their reasoning, not in regards to the outcomes.) In the Heart of Atlanta Motel v. McClung case (from 1964 ) the Supreme Court upheld the Civil Rights Act as applied to a segregated hotel in Atlanta, on the grounds that 75% of the hotel’s clientele was from out of state, and the hotel itself was located near interstate highways. But this raises all sorts of questions: what about those hotels whose clientele was only 70% from out of state? 50%? Is racial discrimination morally and legally acceptable at hotels that cater only to the people of Georgia? These objections were not merely theoretical: by basing the power of the federal government to protect civil rights on the commerce clause, the Supreme Court found that it had to constantly re-litigate the issue, as the government’s power appeared to depend upon the presence of contingent empirical factors– such as the proximity of businesses to public highways. Can a barbecue restaurant still practice segregation if it is located on a dirt road in rural Alabama, and only barbecues Alabama pigs? Actual adult lawyers discussed these questions, as if they raised points of serious moral significance. In the end, the commerce clause was able to encompass the dirt road bbq shack, as the restaurant sold RC cola that had been bottled out of state. Given the absurdity of these considerations, it may have made sense for courts to apply their creativity to the 14th Amendment, instead of trying to yoke the issue of racial discrimination to interstate commerce.
Ranking below the second reconstruction in terms of significance, but still of obvious importance, are Medicare and Medicaid. While the differences between the two policies are rather complex, in essence, Medicaid is public health care for the very poor, while Medicare is public health care for the very old.. The federal fiscal commitment to Medicaid is open-ended—the funds provided by the federal government depend upon state level decisions. This is because Medicaid (though not only Medicaid) is funded through matching grants as opposed to block grants. A block grant is simply a transfer of money from the federal government to state governments; with matching grants, however, the amount of money that the state received from the federal government depends upon how much money the states are willing and able to spend. The formulae used for federal matching grants are enormously complex; in the case of Medicaid grants, the federal government takes into account a variety of economic and demographic factors in order to determine how much aid states will receive. In practice, this means that the matching grant system tends to redistribute money from relatively wealthy states to relatively poor states. Thus, one of the major purposes of federal “fiscal federalism” is to reduce economic disparities between states, and also to limit competition between states that might lead to a “race to the bottom” in terms of spending decisions and taxation.
There are many interesting reasons why the United States chose not to adopt universal health coverage at that time, and instead adopted a piecemeal approach to the expansion of public provision of health care. Since the 1930s and 1940s, tax incentives encouraged the provision of private health insurance by employers; most middle class people did not want to give up these benefits, and this is why LBJ pushed to cover the uninsured, instead of adopting a British or Canadian style of public health care. The most important consequence of the slow expansion of health care policy was that each additional step would prove increasingly difficult.. In the USA, the national government tried to expand healthcare coverage through a combination of tax incentives (that is, businesses were given tax incentives to compensate workers through health care coverage) and protections for the very poor and the sort of old. Once those policies are in place, it ends up being very difficult to gain the political support to expand coverage to those who have fallen between the cracks. Any changes in health care policy have the potential to affect the health care of people who are already covered by existing laws, whether those laws are the tax incentives that have led most middle class people to be covered by their employers, or the federal policies that directly cover retirees. This is why the Affordable Care Act (often referred to as “Obamacare”) has the potential to be curtailed in a variety of ways; unlike earlier expansions of the welfare state, it has relatively weak support.
The problems of the Affordable Care Act, and indeed the problems of American health care in general, can be analyzed in terms of the dynamics of competitive federalism. With the federal government unwilling or unable to completely displace state regulation of health care and health insurance—and with federal courts, for the most part, willing to defer to state regulatory power as well—it is exceedingly difficult for Americans to benefit from a national, competitive market in health care. Many states require insurance policies to cover expensive treatments, even when an individual’s deductible limit has not been reached; other states tax the health care savings accounts that have been established by federal policy. In general, whether you are dealing with a socialized health care system or a private health care system, the “insurer, whether a government or a private entity, has to find some way to constrain costs. In Canada’s medical system, this is achieved by rationing (limiting access to medical services.) The reason that the USA’s health care costs have risen for a generation is that insurance companies are largely prevented from doing what state-managed health care systems do as a matter of routine. State-level regulations, not “the market,” created a system in which, increasingly, the only options available to individuals were expensive health care plans, or no coverage at all. Financing health care is an exceedingly complex topic, but we should not assume that the problems of health care in the United States—the limits of coverage, the exploding costs—are a consequence of limited government involvement in the health care market. The problem, rather, is the wrong kind of government involvement— in particular, state level regulation that restricts consumer choice and increases health care costs. Even a brief consideration of health care policy helps us to understand why the “individualist” or “libertarian” James Madison was skeptical about the states.
Several other aspects of the Great Society had an impact on American political development and American federalism. The host of policies associated with Lyndon Johnson’s “war on poverty” introduced a new, more antagonistic element into state-federal relationships. This is because many of these policies attempted to bypass state governments and even city governments to provide direct federal aid to various community organizations. This led to conflict, even conflict within the Democratic Party, as the community organizations that received federal funds often found themselves at odds with state and city agencies responsible for things such as worker training programs, public housing, and a variety of other welfare policies administered by state and local governments. There is wonderful book by the now deceased Democratic Senator Daniel Patrick Moynihan called Maximum Feasible Misunderstanding, which explains in great detail how the federal government’s attempt to empower citizen groups in northern cities led to a sort of civil war within the Democratic party.53 The largely Democratic governors, mayors, and state legislators in the northern states and cities often found themselves at odds with national Democratic leaders over the implementation of the “War on Poverty.” In many ways, this episode has more relevance to the issue of party politics and organization. But it does introduce an important theme: in comparison with the development of a welfare safety net during the New Deal, the advances of a national social policy agenda during the Great Society era led to far more conflict between the states and the federal government.
The increasing conflict between states and the national government during this time is also connected to the increased significance of direct regulation or “federal mandates” which imposed direct costs on state governments. All things being equal, states prefer to get money from the federal government with few strings attached. If the federal government is going to force them to do things, states prefer that the federal government help them to pay for it. In the late 1960s and beyond, the federal government relied increasingly on policies that imposed costs on states– whether directly, or indirectly by imposing costs on businesses– and it is not surprising that this created more tension between the two levels of government. A new range of policies that aimed to deal with pollution, consumer protection, worker safety, the disabled, and so on, became a major source of partisan conflict. Far more than the welfare safety net of the New Deal, the new economic and social regulation of the Great Society era remains a focal point for partisan conflict.
Even a moment’s reflection can let us see that environmental regulation, to take only the most prominent example, imposes costs on some regions, and some industries, even if it ends up being for the overall common good. What this means is that Great Society regulation produced a permanent opposition that would find its home in the Republican Party– a party that, by the 1960s, had made its peace with the most aspects of the welfare safety net established by the New Deal. The Republican Party did not oppose Johnson’s agenda at every step. In the Senate, for instance, the party of Lincoln provide considerable support for the “Second Reconstruction.” 80% of Republican senators supported the Civil Rights Act of 1964; while only 63% of Democratic Senators voted for the law. Nevertheless, when looked at as a whole, conservative opposition to the “Great Society” era regulation has proven to be very long lasting.
The conservative critique of social regulation is not usually aimed at the goals of regulation, but rather at the way modern regulations impose unanticipated and uncontrollable costs. We cannot address every aspect of this issue, so I have chosen to examine a law that illustrates how the problem relates to federalism, in the sense of federal-state relations. Consider the Education for All Handicapped Children Act of 1975, a law that is still a source of political tensions and litigation all across the United States. This is no surprise, as the law was designed to be a permanent source of tension and litigation.54
The Education for All Handicapped Children Act does not tell the states specifically what to do regarding education for the disabled; it does not provide the states with specific guidelines and incentives. Instead, the law creates a statutory right: specifically, the law creates a right to “free and appropriate public education for the handicapped.”. This type of provision is often called an “unfunded mandate”– a federal law that imposes costs upon states (or businesses) without providing any financial compensation.
Most people would not object to a federal law that requires states to provide free and appropriate education for the disabled; it is a noble goal that aims to help vulnerable people. Yet it is not too difficult to see that there might be disagreement over the meaning of “appropriate.” Unsurprisingly, how a school board defines an “appropriate education” will be very different from how parents see the issue. When upper middle class Americans disagree with their governments, they call their lawyers, and the EAHCA encourages them to do this. This statutory right creates a new form of federal policy-making: parents and groups of parents sue school boards over policy decisions, and federal courts play an ongoing role in supervising the conflict. It is hard to know what to call this type of policy-making. Lawsuits under the EAHCA did not resemble ordinary lawsuits or legal cases, because lawsuits usually come to an end. This new federal-state policy-making process creates a permanent and antagonistic relationship between parent groups, school boards, state officials, and federal courts. The name political scientists use for this new form of policy-making is “institutional reform litigation,” and it occurs in many areas outside of education policy. The name that conservatives have for it is “a very bad way of making policy.”55 The conservative position, on this and many other policy issues, can be summarized as follows: if the national agenda is going to expand, at least give us the “New Deal”; at least give us a decision about what is to be done, and how much is to be spent on what policy. Creating a right, and then telling interest groups and judges to work out the details in court, is unlikely to yield decisions that reflect the long term public interest.
Our discussion here can only hint at the ways in which the national government’s power changed during the heyday of American progressive liberalism in the 1960s and the 1970s. On the one hand, the national government adopted a much more ambitious regulatory agenda, particularly regarding environmental policy, consumer rights, and worker health and safety—to say nothing of the government’s civil rights agenda. Some of these new policy areas fit fairly readily within the Constitutional framework. For instance, air pollution or water pollution that affects more states than one surely constitute “commerce amongst the states,” and from the perspective of “competitive federalism,” there is nothing wrong with the federal government using environmental laws to prevent one state from imposing environmental costs on others. At the same time, courts continued to back away from fully nationalizing environmental policy—rather than rely on the old doctrines of federal supremacy and exclusivity, the courts allowed for a confusing mishmash of state and federal jurisdiction. As for other areas of law—criminal rights, for instance, but also regarding the implementation of federal policies such as the EAHCA—courts began to intervene more directly in state policies. Courts played less and less of a role in preventing inter-state protectionism and exploitation, and more and more of a role overseeing the day to day operations of state schools, prisons, mental hospitals, and so forth.
VIII. The Politics of Federalism Today↑
Having completed our survey of the New Deal and the Great Society, we are in a position to take a general look at the politics of federalism as it exists today. The general pattern can be described fairly succinctly: since the 1970s, the political movement known as the “new right” has opposed the expansion of federal power (in most areas), while progressives (in general) continue to support enhanced national regulatory power (including judicial power rooted in constitutional and statutory rights). At the same time they oppose the judicial doctrines that once limited interstate exploitation and protectionism.
Progressives oppose competitive federalism because of the constraints which it imposes upon state policy-making. Progressives fear that competition amongst the states will lead to a “the race to the bottom” in American federalism. Consider this: the American states constitute (in theory) one of the largest free trade zones in the world. Advances in communication and transportation technologies make businesses and individuals highly mobile. How does this impose constraints on policy-making at the state level? The answer is quite simple; if one state attempts to create a more ambitious welfare state, or more ambitious regulatory programs, the costs imposed on businesses and individuals will give them an incentive to relocate to states that tax less and regulate more lightly. Competition in a federal system causes a “race to the bottom” in terms of social expenditures and regulation ensues. At the same time, progressives have always been hostile to judicial doctrines that prevent states from protecting their own industries, or extracting resources from individuals and corporations engaged in inter-state trade. Rather than being simply advocates of national power, progressives favour doctrines that enhance government power at both the state and national level.
There are some reasons to doubt the “race to the bottom” theory. States might have flexibility in terms of taxing, spending, and regulation, because all states are not created equal. On the one hand, states might have geographic or even cultural advantages that can override the “race to the bottom dynamic.” There are many businesses and many rich people in highly-taxed New York, and not very many of them are in a rush to move to Wyoming. This is not to suggest that the “race to the bottom” dynamic has no impact on American federalism, but it is easy to exaggerate its impact. We can consider this in light of the impact of “globalization” on social policy in separate nations. Despite the increased ability of individuals and corporations to re-locate from one country to another in the late 20th and early 21st century, the differences between nations in terms of social policy and taxation have obviously not been eliminated.
I have described some “progressive” and “conservative” perspectives on the problems of American federalism, but it is important to see that these terms are not always synonymous with “Democrat” and “Republican.” The reaction against the excesses of federal power that were prominent in the 1990s had adherents in both parties. Nevertheless, it is true that the reaction against national power that occurred during this period was at least initially associated with the right, and almost every explanation about the rise of the “new right” relates to federalism in some way. The New Right was a collection of groups who, whatever their differences, challenged the New Deal-Great Society policy regime that had been created by Democrats, though extended in many ways by centrist Republican Presidents like Eisenhower and (in particular) Richard Nixon. The new right consisted of three major elite groups. The first and most famous were the neo-conservatives, former “liberals” who rejected aspects of progressivism; and were concerned with impact of national policies on economic growth and social order. The neo-cons existed in a somewhat uneasy alliance with the “paleo-cons,” who were more likely to defend the pre-New Deal Constitutional order in its entirety, as well as the pre-Great Society racial order. Added into the mix were Christian conservatives concerned with moral issues and motivated by judicial intervention into policy fields such as education and abortion. All three types of conservatives were united by hostility to communism, and a willingness to project American power abroad to promote American interests (and thus, ironically, the New Right shared more in common with Woodrow Wilson and FDR than with the pre-1960 Republican Party.)
Critics of federalism were not only found on the right. The basic ideas of the so-called new federalism– federal power was too unconstrained, states should be given more leeway in implementing policy, etc.– had proponents within the Democratic party. During the 1990s, President Clinton–not coincidentally, a former governor–oversaw a major transformation of welfare policy, the primary goal of which was to give more discretion to state governments regarding the mix of training, education, and work requirements in welfare policy. The old policy, a part of Social Security called Aid to Families with Dependent Children, was based upon fairly inflexible national standards, and the new policy- TANF56– did not do away with national standards entirely. Nevertheless, it was one of the most significant examples of “devolution” to the states in recent decades.
Just as some Democrats have supported aspects of “devolution,” Republicans have played a role in extending the scope of federal policy authority. President G.W. Bush oversaw a massive expansion of federal authority in education in the form of the “No Child Left Behind Act,” (NCLB). NCLB was based upon a fair degree of bi-partisan consensus. TANF was passed by a GOP-controlled Congress, and NCLB was co-sponsored by Senator Ted Kennedy., the most liberal of all liberal Democrats. Unlike TANF, NCLB was based upon the premise that states should have less discretion over goals in education policy. What both these examples illustrate is that bi-partisanship is a real force in American politics, and federalism can be an area of bi-partisan co-operation (though certainly not consensus.).
When we turn to constitutional doctrine in 21st century, the situation is very, very different. “Progressives” and “Conservatives” on the Supreme Court have entirely different understandings of American federalism, particularly as it applies to the federal government’s power under the commerce clause; on this issue there is very little common ground, only a no man’s land dotted with barbed wire and trenches.
Amongst Supreme Court justices, there are three distinct perspectives about the ongoing conflicts over the character of American federalism. The progressive position– held by Justices Ginsburg, Breyer , Sotomayor, and Justice Kagan– is that of “process federalism,” which means that they do not think that the Supreme Court should set limits on federal jurisdiction.57 The scope of federal power and state power should be determined by the political process, because the political process provides adequate protection for the prerogatives of the states. The perspective of the conservative Justices are a little more difficult to categorize. Justice Anthony Kennedy’s position on federalism– shared to some extent by former Chief Justice Rehnquist and and now retired Justice O’Connor– is that while the legal precedents upholding the expansion of federal power during the New Deal should be upheld, the courts should still impose some kind of limits on the “commerce clause.” Now, what should those limits be? How should the court determine them? That is a good question; I am not sure that the “New Federalists” have given a definitive answer to this question. As a consequence, they are open to the charge of basing their federalism decisions not on principle, but simply on their policy preferences.
The Supreme Court upheld the most essential elements of “Obamacare” in National Federation of Independent Business v. Sebelius; this occurred as a consequence of Chief Justice Roberts joining the four “progressive” justices. However, Roberts’ argument was that while the “individual mandate” component of Obamacare can be upheld as a tax; it cannot be upheld as an exercise of Congress’ power to regulate commerce amongst the states. To understand this viewpoint, we have to understand the contemporary debate over the scope of the commerce clause.
On the one hand, NFIB v. Sibelius case suggests that the differences between the “conservative” and “liberal” wings of the court are stark—and that is true, at least if you confine yourself to the question of the commerce clause. According to the dissenting conservative justices, the individual mandate of the commerce clause is unconstitutional because it demands an act of commerce, instead of regulating commerce. The act cannot be sustained as a tax, because it was not a tax—it was enacted as a penalty for failure to abide by a regulatory statute.
The progressive justices on the court agreed with the Chief Justice that the individual mandate provisions of the ACA can be upheld as a proper exercise of Congress’ power to tax, yet they also argued that the mandate constitutes a regulation of commerce amongst the states—that is, a decision by an individual not to engage in commerce is, in effect, an act of inter-state commerce. Here is how they reached that conclusion.
i) The health care market is huge!58
ii) … and everybody gets sick!59
iii) … but medicine is costly, and under federal and state law, in many instances health care cannot be denied to those without insurance. 60…
iv) … that means that the insured subsidize the uninsured!
v) States cannot expand medical coverage on their own, as this would create a ‘welfare-subsidy” magnet (the uninsured would move to states that provide generous coverage.)
vi) Why not have a national policy to address this, a la Social Security? The answer is that Congress wanted to maintain a role for state governments and private insurers in covering the uninsured.61
vii) Yet what does this have to do with commerce amongst the states? If “commerce amongst the states” is equivalent to every economic action, or action that might at some point affect the economy, or non-action that has economic implications, then this clearly falls under Congressional power to regulate commerce amongst the states. 62
At this point, interestingly enough, the concurring progressive justices start to make sense. In a way, once you have accepted that the national government can regulate wheat (as in the case of Wickard v. Fillburn), it is difficult to suddenly introduce the “you can’t force someone to engage in commerce” standard. After all, Farmer Wickard was forced to buy wheat on the open market. This is the fundamental problem with conservative jurisprudence: it wishes to trim back some aspects of the national government’s commerce power, without challenging the relevant New Deal precedents. If Wickard is good law, then Obamacare is constitutional– though such an interpretation implies that the Constitution imposes few restraints, if any, on federal jurisdiction.
One question we might have is whether justices approach federalism in a consistent manner. The case of Gonzales v. Raich illustrates the problem. This case dealt with federal prohibition on the growing and possession of “medical marijuana” for “personal use.” The majority’s position– adopted by seven of the nine justices– was that this was “close enough” to interstate commerce to justify federal regulation, the idea being that you have to prohibit personal possession of pot to prevent it from being transported from “cool” to “square” states. The conservative Justice Clarence Thomas saw things differently:
“Respondent’s local cultivation and consumption of marijuana is not ‘Commerce … among the several States.’ Certainly no evidence from the founding suggests that “commerce” included the mere possession of a good or some personal activity that did not involve trade or exchange for value. In the early days of the Republic, it would have been unthinkable that Congress could prohibit the local cultivation, possession, and consumption of marijuana. In fact, Thomas Jefferson was probably high when he wrote the Declaration of Independence.”
(No, he didn’t write that final sentence.)
Is Justice Thomas’ understanding of federalism correct? Does federalism mean that we should be able to carry a gun into a school zone while smoking state sanctioned medical marijuana? From the perspective of legal interpretation, there is much to be said for this position; from a political perspective, it is certainly out of the mainstream of American public opinion. Justice Thomas might argue that it isn’t his job to be a pollster.
What this illustrates, however, is that the New Deal revolution in American federalism was to some degree built upon sand. At the time of the Great Depression, the public mood and scope of the crisis seemed to justify indifference to established constitutional norms; there were significant changes in federal policy, without any corresponding formal changes in the scope of federal power. The un-amended Constitution exists as a resource, which can be used by those who challenge the New Deal-Great Society policy regime.
To sum up, the development of cooperative federalism has left the USA in a difficult constitutional predicament, and there is little possibility that it will be resolved. While it is true that there is no a-priori way to separate “national” from “local” government functions, one can still suspect that the expansion of federal jurisdiction and federal spending have made it all but impossible for the national government to govern effectively. One of the most important advantages of federalism is the division of labour— a national government that must concern itself with the regulation of parking spots and playground behavior will be less attentive to genuinely national issues. The USA has many of the disadvantages of unitary government with few of the compensating advantages—such as the advantages of having clear rules and clear lines of responsibility. American federalism, as currently constructed, has neither the benefits of a governmental division of labour nor the efficiency of having a single sovereign. Instead, Americans have a federal government that looks into every nook and cranny of the nation, and states that obstruct commerce, enable a disastrous litigation-industrial complex, and evade fiscal discipline.
Federalism could not have remained static, of course. The expansion of genuinely national policies—anti-discrimination laws, voting rights laws, social security—have achieved real and important results. But the shift from competitive to cooperative federalism has entailed huge costs as well; it remains to be seen whether this era of economic decline will force new transformations on the American federal system.
IX. Conclusion: Varieties of Federalism in American Political Development↑
For the modern progressive, federalism is usually seen as the “original sin” of the American political order, because the strength of state governments allowed racial segregation and inequality to flourish. Increased national power was necessary to implement civil rights, establish new rights, regulate a complex economy, and develop the welfare state. For those on the right, American federalism is usually understood in terms of de-centralization; according to this view, national power must be restricted in order for individual liberty to thrive. Yet both groups tend to misunderstand the way in which the Constitution structured national power: the purpose of the Constitution of 1787 was, in large part, to discipline state governments, not to allow for national consolidation. In the twentieth century, American federalism has departed from the original constitutional vision of the founders, but not in the way that conservatives usually assume. National power has grown, but it has done so in conjunction with state power—the shift from competitive to cooperative/cartel federalism enables government to expand at all levels.
The Constitution aimed to achieve competitive, judicially managed federalism, in which individuals would be free to move across state boundaries, and in which states would have to compete for the allegiance of citizens without discriminating against other states, and without interrupting the flow of interstate commerce. Most importantly, the Constitution provided a basis for federal courts to maintain competitive federalism withoutCongressional action. The enumerated powers of the national government are limited, and the structure of national elections and the separation of power make it difficult for the national government to exercise the powers that it does possess. Yet federalism does not, for the most part, even require the national legislature to act—the various limits on states found the in the Constitution can be enforced by courts in response to individual cases. Enforce the limits on state government found in the Constitution, and you will go a long way towards establishing competitive federalism. Yet this was not enough. Federal courts had to build upon the basic purpose of the constitutional order in order to prevent state subversion. According to the “dormant Commerce Clause doctrine,” states cannot enact laws that infringe upon interstate commerce; in other words, Congress controls commerce amongst the states even when the power is not being used, or even when Congress is “dormant.” The commerce clause itself is thus always awake, even when Congress doesn’t use it, because courts can use it stop states from interfering with trade (in unjustified ways.) Without the dormant commerce clause, as applied by federal courts, the U.S. economy would have been destroyed by state mercantilism and protectionism in the 19th century—just as the American economy was destroyed by inter-state protectionism under the Articles of Confederation. In addition, the Constitution forbids states from using many of the most obvious tools of protectionism and inter-state economic exploitation.63 Federal diversity jurisdiction allows individuals and corporations to escape from biased state law and state juries; limited national jurisdiction (and the great difficulty of forming national re-distributive coalitions) forces states to compete with each other on the basis of social and economic policy.
Given all of the restraints on state power found in the Constitution, one wonders why the states continued to exist at all. A unitary system of government has many advantages, but this was never a real possibility for the USA. If the Constitution was to be adopted, if it was to endure, the new system would have to make a place for state governments. What was most desperately needed—from the perspective of the state governments—was some way of controlling the national “legislative vortex,” the possibility that the national legislature would draw power into itself, thereby exceeding its jurisdictional boundaries. To prevent this, the Constitution builds representation for the states into the system of national representation, principally through the Senate. Staggered elections, combined with separate institutions sharing legislative power, make it difficult for national power to be marshalled in response to short term changes in public opinion. Finally, the complex amendment process provides additional protections for state governments against national usurpation. States had to surrender a great deal when they accepted the Constitution; the structure of the Constitution made it likely that they would not have to surrender more in the future.
Yet what exactly had been surrendered? This remains a controversial point. The national government only possesses enumerated powers; that some powers are listed or enumerated means that some powers have been excluded (that is important for American progressives to remember); However, many of the most important powers of government have been granted to the national government. The states will not be sovereign, because they cannot control the movement of people and things, they will not be able to control the currency, and in general, they lack the powers that sovereign states use discriminate in favour of their own citizens (or to discriminate in favour of established economic interests.)
Yet controversies soon emerged. In particular, courts had to elaborate the basic constitutional structure in order to prevent “defection” by state governments. For instance, if states can prohibit corporations from conducting business in-state, or if they penalize them in various ways, then the economy will not be truly national. Thus, courts developed complex (and apparently contradictory) doctrines to prevent state protectionism. Did this lead to unbridled judicial creativity? In some ways, yes. Corporations were given access to federal courts vis a vis federal diversity jurisdiction, but they were not treated as “citizens” under the Privileges and Immunities clause (e.g. they don’t get to vote) ; in other words, courts had to develop doctrine in response to changing forms of economic organization, guided by the underlying purposes of federalism.
There is, however, very little that courts can do to prevent the national government from using its spending power under the “general welfare clause” to break down the jurisdictional boundaries between the state and national governments.</emThere is nothing in the Constitution that limits the federal spending power vis a vis bargaining with the states (other than explicit limitations; you can't bargain with the states to impose unconstitutional conditions). Thus, some changes in federalism that occurred in the 20th century were a consequence of the flexibility that had always been part of American constitutionalism. Formal constitutional amendments changed the federal system as well. Once the federal government had the power to tax individual income, it had the ability to use the spending power (in the form of federal grants) to shape policies that fall within state jurisdiction. “Marble cake federalism” is the result.
Co-operative federalism is the form of federalism that exists today, and it consists of the following major elements. First, the powers of the national government have expanded either through formal amendments (Civil War Amendments, 16th Amendment) or through changes in judicial doctrine. The power to tax personal income—granted by the 16th Amendment—is particularly important. Assuming that the consensus view is correct—that the Constitution imposes few limits on the power to spend money—then the national government has always had the power, in theory, to shape state jurisdiction while staying within the confines of the Constitution. The only thing that limited the spending power was the power to tax. The power to tax income (as opposed to imposing taxes on the basis of population) would thus set the stage for the performance of 20th century fiscal federalism
Money is the sinew of co-operative federalism—federal grants, combined with federal conditions are probably the most important policy mechanism of the American national government There are innumerable distinctions amongst the types of grants—the most important are “categorical” (for specific policies/projects, usually tied to detailed rules) and “block grants” (for more general purposes, usually tied to fewer restrictions); most major grants involve state matching funds
Once armed with the power to tax income, the power to spend for the general welfare becomes a way not of displacing the states, but of “empowering” and directing them. We can think of this in terms of a thought experiment: how will policies develop under conditions of competition (assuming limited federal jurisdiction)? Each state will face constraints when imposing taxes for social policy– raise taxes high enough, and individuals will “vote with their feet.” This might not lead to a “race to the bottom” (millionaires will still prefer Manhattan to Wyoming) but this still places considerable constraints upon state level policy-making. Federal grants in aid enable poorer states to expand policy without paying the costs of competition.
So much for the new fiscal federalism. On the regulatory side, marble cake federalism often involves federal mandates combined with some form of state implementation. Just as often, federal policy authority does not now displace the policy authority of the states, but provides a “policy floor” that the states can augment as they see fit. Courts, rather than enforcing federal supremacy and exclusivity, have applied a “relaxed” federal pre-emption doctrine. This means that courts have, in general, moved away from the “one problem, one sovereign” perspective; states can regulate in areas of federal jurisdiction and vice versa. Similarly, courts have tended to be deferential in regards to state taxes or licensing requirements that are, in actual practice, barely veiled protectionist measures. One of the central purposes of the Constitution was to prevent states from interfering with inter-state commerce by limiting ability of states to tax and regulate commerce. This purpose could have been compatible with an expansive understanding of the scope of the commerce clause. Yet while the power of the national government to regulate under the commerce clause has expanded, so has the power of state governments to interfere with commerce.
What are the advantages and disadvantages of a system that abandons competitive federalism in favour of cooperation? That is a difficult question to answer. Arguably, a system of complete nationalization would be preferable to what currently exists, as it would eliminate peculiar features of American cooperative federalism that can lead to significant policy distortions. Complete nationalization is just as unlikely as a return to the system of competitive federalism that had emerged by the end of the 19th century, however. Barring a radical change in judicial doctrine, Americans are stuck with a federal system based upon 1) expansive federal jurisdiction 2)overlapping state jurisdiction with all of its attendant complexities 3) judicial activism in social policy (often invited by Congressional statutes) combined with judicial deference to state-level economic mercantilism and protectionism, and finally 4) a form of fiscal federalism that overloads national policy-making capacity and distorts state policy-making priorities.