3 Federalism Wed, Thur.. Federalism can put the national and state governments in conflict. Here a California man compares the aroma of various varieties of marijuana on the final day of business of a medical marijuana dispensary, legal in California but put out of business by the national government. Rich Pedroncelli/AP Images

3 Learning Objectives Characterize the shift from dual to cooperative federalism and the role of fiscal federalism in intergovernmental relations today. 3.3 Explain the consequences of federalism for diversity in public polices among the states. 3.4

3 Learning Objectives Assess the impact of federalism on democratic government and the scope of government. 3.5

Intergovernmental Relations 3.3 Intergovernmental Relations Over the years, power has gradually shifted from states to the federal government. Through categorical and block grants, the federal government provides state and local governments with substantial portions of their budget. It uses this leverage to influence policy by attaching conditions to receiving the grants. Sometimes Washington mandates state policy without providing the resources to implement the policy, which does not please the states. Federalism allows for diversity in policy among the states and for states to be policy innovators. It also allows for inequities between states with different levels of resources and may discourage states from providing services. From Dual to Cooperative Federalism Devolution? Fiscal Federalism

From Dual to Cooperative Federalism 3.3 From Dual to Cooperative Federalism In dual federalism, the federal government and the states each have spheres of sovereign authority, like a layer cake. Proponents are inclined to interpret federal power narrowly. In cooperative federalism, the national government and the states share spheres of power, blurring the lines of authority more like a marble cake. The U.S. system has moved from a dual towards a cooperative model of federalism. Shared federal-state responsibility for education and transportation both provide examples. Usually, the states bear primary responsibility for education and transportation programs under cooperative federalism. The federal government shares the costs by providing federal money to the states and sets guidelines for local administrators to follow. Dual federalism (Pre New Deal) Separate spheres of authority Layer cake Interpret federal power narrowly (Strict Interpretation) Cooperative federalism (Post New Deal) Shared costs (Between State and Federal Government) Federal guidelines (For local Administrators to follow) Shared administration (Between States and Fed)

Interstate highways (90-10) 3.3 Interstate highways (90-10) Cooperative federalism began during the Great Depression of the 1930s and continues into the twenty-first century. The federal government provides much of the funding for interstate highways, for example, but also attaches requirements that states must meet. Edwin Beckenbach/Getty Images

From Dual to Cooperative Federalism 3.3 From Dual to Cooperative Federalism States are responsible for most public policies dealing with social, family, and moral issues. The Constitution does not give the national government the power to pass laws that directly regulate drinking ages, for example, but it can influence the states by making federal money contingent on adopting certain policies, such as raising the state drinking age to 21, in line with national prerogatives. Cooperative federalism in action Public Education Highways and State Alcohol laws 8

Devolution? 3.3 Party divide on federalism Devolution since Reagan In simplistic terms, the Democratic party tends to favor federal government power to advance national policies of health, safety, and social welfare. By contrast, the Republican party has traditionally favored a weaker national government to allow states to handle these responsibilities without government regulations. After decades of new federal policies by the Democrats, the Republican party gained control of the White House in 1980. They attempted to devolve some federal power back to the states by cutting funds for domestic federal programs. Then, in 1994 the Republicans gained control of Congress and repealed many federal laws, giving states more latitude to set their own policies. But then an odd thing happened with the devolution trend. The Republicans realized that the best way to loosen economic regulations and strengthen social ones was to harness the authority of the federal government and restrict state power. Activity: Hold a meeting of the Editorial Board of Publius: The Journal of Federalism. Have students visit the journal's website (http://publius.oxfordjournals.org/ ) and explore some recent articles to see what types of issues they address. Discuss what the table of contents should look like for this year's "State of Federalism" issue. What issues should it address? What trends can they discern? Party divide on federalism Democrats favor national government Republicans favor states Devolution since Reagan Loosening federal regulations 1994 Congress (Republicans take over) Harnessing federal government power (Republicans realize that the best way to loosen regulations is to restrict state power)

Fiscal Federalism 3.3 The Grant System Categorical grants Must have a Specific purpose Crossover sanctions-federal dollars for one program used to influence another Crosscutting requirements-Conditions on one Federal Grant are extended to all other Federal Funds 2 Types of Categorical Grants: Project grants-Awarded on basis of Competition Formula grants-Distributed according to Formulas Fiscal federalism is the term used to describe federal grants-in-aid that are a key part of cooperative federalism. There are two main types of federal grants. Categorical grants can only be used for specific purposes, and they often have strings attached, such as non-discrimination. Crossover sanctions withhold funds unless states change their policy in some area to conform with federal government goals, such as withholding funds for highway construction unless states raise the drinking age to 21. Crosscutting requirements occur when a condition on one federal grant is extended to all activities supported by federal funds, regardless of their source. For example, if a university discriminates illegally in one programs, such as athletics, it may lose the federal aid it receives for all its programs. There are two main types of categorical grants. Project grants are the most common and are awarded on the basis of competitive applications. Formula grants are distributed based upon the number of recipients, income, or some other criterion.

Fiscal Federalism 3.3 The Grant System Block grants are much less restrictive and generally only specify the policy area in which they are to be used, such as education or health care. States prefer block grants because they give them more discretion in how to allocate the funds. Legislators and lobbyists are engaged in a perpetual feeding frenzy in Washington to "bring home the bacon" to their states. Their vigilance keeps federal dollars spread evenly rather than going to the most needy as originally intended. Requirements that direct states to provide additional services as a condition of a federal grant are a type of mandate. Congress usually appropriates some funds to help pay for the new policy, but sometimes it does not. Unfunded mandates are particularly unpopular with states. Can you imagine why? The Grant System Block grants The scramble for federal dollars The mandate blues

3.3 FIGURE 3.1 Fiscal federalism: Federal grants to state and local governments Federal grants to state and local governments have grown rapidly in recent decades and now amount to more than $650 billion per year. The sharp increase in grants for 2010 and 2011 was the result of the stimulus package designed to counter the country’s financial crisis. The distribution of grants is not static. The percentage of grants devoted to health care, especially Medicaid, has increased substantially, mostly at the expense of income security programs. Source: Office of Management and Budget, Budget of the United States Government, Fiscal Year 2013: Historical Tables (Washington, DC: U.S. Government Printing Office, 2014), Tables 12.1 and 12.2.

No Child Left Behind Act 3.3 No Child Left Behind Act Policies of the federal government may have major impacts on core policies of state and local governments, like elementary and secondary education, and determine how much is spent on these policies. Jeff Greenberg/Peter Arnold/Getty Images

3.3 3.3 Which of the following gives states more discretion in using federal funds? Based on our discussion of federalism, can you answer this? Categorical grant Formula grant Block grant Mandate 14

3.3 3.3 Which of the following gives states more discretion in using federal funds? Block grants must still be used for a specific purpose but states have more discretion in how they spend the funds. Therefore, most states prefer them to categorical grants. Categorical grant Formula grant Block grant Mandate 15

Diversity in Policy 3.4 Diversity in public opinion reflected Federalism allows for considerable diversity among the states in their policies. One state can have the death penalty if its citizens favor it, and another state can abolish it if its citizens take a different view. This constitutional arrangement facilitates state innovations in policy. It also allows states to move beyond the limits of the lowest common denominator problem in national policy. States can be innovators when federal policy lags, such as by raising the minimum wage above the federal level. However, federalism also leaves states dependent upon the resources within their borders to finance public services. It may also discourage states from providing some services so that, for example, poor people do not move to states with higher welfare benefits. It also means that residents of states that choose to spend less on certain services may lag behind residents of other states in, for example, quality of education. Diversity in public opinion reflected Policy innovation facilitated Diversity has its downside

3.4 Which of the following is a result of federalism? I want to test your comprehension of this topic by asking you this brief question. Diversity of policies in states States can be policy innovators States can spend less on education All of the above 17

3.4 Which of the following is a result of federalism? Federalism gives important powers to states. One state can set policies that may serve as models for other states. State spending is left to state legislators to determine. Diversity of policies in states States can be policy innovators States can spend less on education All of the above 18

Understanding Federalism 3.5 Understanding Federalism On the positive side, federalism provides for effective representation of local interests and reduces conflict at the national level. It also encourages acceptance of losing elections and increases the opportunities for citizens to participate in government to see their policy preferences reflected in law. On the negative side, federalism not only increases opportunities for local interests to thwart national policy, but also can result in the election of a president not favored by a majority of the public. Federalism can also complicate efforts to make government responsive. The national government has grown in response to the demands of Americans for public services it can best provide, but it has not in any way supplanted the states' authority. Federalism and Democracy Federalism and the Scope of the National Government

FIGURE 3.2 State and local spending on public education 3.5 FIGURE 3.2 State and local spending on public education A downside of the public policy diversity fostered by federalism is that the resources for public services vary widely from state to state. This map shows the great variation among the states in the money spent on children in the public schools. Can we say there is equal opportunity in the U.S. when the quality of education varies so much between states? Source: U.S. Department of Commerce, Statistical Abstract of the United States, 2012 (Washington, DC: U.S. Government Printing Office, 2012), Table 253. The data are for 2009.

Federalism and Democracy 3.5 Federalism and Democracy Contributions to democracy Decentralizes politics Disputes resolved at lower levels of govt. Majorities can be heard at state level More opportunities for participation Losing elections less painful Detriments to democracy Electoral College Thwarting national majorities The federal system was designed by the Framers in part to avoid tyranny of the majority. In addition, it has contributed to democracy in several ways. Federalism decentralizes policy, allowing different interests in different areas to elect representatives to promote those interests at both the state and federal level. This is pluralism at work, as Madison intended. Moreover, a democratic majority at the state or local level can get a policy enacted that might not represent majority opinion at the national level. Since many policy disputes are decided at state and local level, the burden on the federal government is reduced. More levels of government also create more opportunities for citizen participation, which is critical to democratic governance. These levels also create more points of access for interest groups. Federalism makes losing elections easier to bear as parties may retain control at one level of government even as they lose it at another. Speaking of elections, the federal system can be detrimental to democracy because the Electoral College can select a president who loses the popular vote, as happened in 2000. Local interests can also thwart national policies supported by a majority of Americans, as southern states did with civil rights. Finally, the existence of so many governments can be confusing.

Table 3.3 The Number of governments in America 3.5 Table 3.3 The Number of governments in America The sheer number of separate governments in America is staggering. Source: U.S. Department of Commerce, U.S. Census Bureau, Census of Governments, 2014. Activity: Try to identify all of the governments that have authority and policymaking responsibilities in your area, from the federal and state governments to the various types of local government. At the same time, identify the types of public policies for which they are responsible. Briefly discuss your impressions of the federal system from your own vantage point. Indicate whether or not you found what you expected, based on your understanding of the American federal system.

Federalism and the Scope of the National Government 3.5 Federalism and the Scope of the National Government The federal government has always been involved in economic regulation but economic policies increased exponentially after industrialization. The federal government, for example, has instituted quotas on foreign imports of automobiles and steel to protect U.S. industries from competition. They have also subsidized faltering industries, such as airlines and railroads. It has passed laws to prevent monopolies and protect the health and safety of workers. The urbanization that accompanied industrialization created social and economic problems that were also addressed through policies at the federal level, such as welfare, environment, and transportation. In many of these policy areas, legislation at the state level would have been ineffective. Louisiana could not pass pollution legislation that prevents states upstream from polluting the Mississippi River before it flows down through its borders. Indiana could not forbid imports of foreign steel. As more policy areas come under the federal government, the scope of national government increases, but the states continue to legislate as they have always done. Why national government grew Economic intervention Industrialization Quotas Subsidies Preventing monopolies Occupational health and safety Urbanization Housing Social welfare

FIGURE 3.3 Fiscal Federalism: The size of the public sector 3.5 FIGURE 3.3 Fiscal Federalism: The size of the public sector The federal government's spending as a percentage of GDP increased rapidly during the Great Depression and World War II. Recent decades have not seen much increase in spending as a percentage of GDP on the part of either the federal government or state governments. In 2009, however, federal spending increased substantially in response to the economic crisis. Source: Office of Management and Budget, Budget of the United States Government, Fiscal Year 2015: Historical Tables (Washington, DC: U.S. Government Printing Office, 2012), Table 15.3.

3.5 3.5 Federalism has contributed to democracy in all of the following ways except: Can you answer the following question based on our discussion? The Electoral College More opportunities for participation Disputes resolved at lower levels More points of access 25

3.5 3.5 Federalism has contributed to democracy in all of the following ways except: The Electoral College determines the election of a president. Federalism determines the powers given to the national and state governments. The Electoral College More opportunities for participation Disputes resolved at lower levels More points of access 26

3 Discussion Questions In what ways has federalism contributed to democracy? In what ways has federalism been detrimental to democracy? Has this pattern followed the Framers' intentions? Could they have foreseen the issues the federal government and the states would have to deal with after industrialization?