1 Chapter Three Federalism

2 Why “Federalism” Matters  Federalism is behind many things that matter to many people: Tax rates Tax rates Speed limits Speed limits Liquor laws Liquor laws School funding School funding Health insurance Health insurance

3 Governmental Structure  Federalism: a political system where local government units can make final decisions regarding some governmental activities and whose existence is protected  Unitary System: local governments are subservient to the national government

4 Figure 3.1: Lines of Power in Three Systems of Government

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7 Federalism: Good or Bad?  Bad: Source of confusion and/or controversy, particularly during times of crisis Source of confusion and/or controversy, particularly during times of crisis Impedes progress and caters to local interests Impedes progress and caters to local interests  Good: Contributes to governmental strength, political flexibility, and fosters individual liberty Contributes to governmental strength, political flexibility, and fosters individual liberty Federalist #10 - small political units allow all relevant interests to be heard Federalist #10 - small political units allow all relevant interests to be heard Federalism increases political activity Federalism increases political activity

8 Federalism: A Bold New Plan  No historical precedent  Gov’t (nat’l and state) derived its powers directly from the people Refer to Federalist #46 and #28 (info on p.54) Refer to Federalist #46 and #28 (info on p.54)  Tenth Amendment was added as an afterthought to clarify the limits of the national government’s power  Elastic language in Article I: Necessary and Proper Clause expands federal power

9 Hamilton vs. Jefferson Hamilton’s views:  The nat’l gov’t was superior in political affairs and its powers ought to be broadly defined and liberally construed.  Used Article VI “supremacy” clause to justify his views. Jefferson’s views:  Federal gov’t was based on agreements b/t the states; people were sovereign.  Powers of nat’l gov’t should be narrowly construed and strictly limited.  Later supported by Madison in the Federalist #45.

10 Debating the Meaning of Federalism  McCulloch v. Maryland (1819) Could Congress charter a national bank? Could Congress charter a national bank? Yes, even though this power is not explicitly in the Constitution (Necessary and Proper Clause) Yes, even though this power is not explicitly in the Constitution (Necessary and Proper Clause) Could states tax the national bank? Could states tax the national bank? No, because “the power to tax is the power to destroy” No, because “the power to tax is the power to destroy” This case gave credence to both the necessary and proper clause and the supremacy clause. This case gave credence to both the necessary and proper clause and the supremacy clause.

11 Nullification  The struggle of states’ rights vs. national supremacy could also be witnessed in how the Supreme Court can decide a case w/o settling the issue.  This became a major issue when the ideas of nullification were put into practice.  In 1798 VA and KY said that states had the right to “nullify” a federal law that they believed violated the Constitution.  John C. Calhoun would bring the issue up again before the Civil War.  After the Civil War, the decision was made that states cannot declare acts of Congress unconstitutional.

12 Dual Federalism  Belief that the national government is supreme in its sphere, but the states are equally supreme in theirs.  These spheres should be kept separate.  This idea was pretty much abandoned, particularly in the area of commerce.  However, recent Supreme Court decisions have moved to strengthen states’ rights.  See major cases on pgs.59-60

13 Federal-State Relations  Grants-in-aid: Dramatically increased in scope in 20 th Century Dramatically increased in scope in 20 th Century Attractive to states for both economic and political reasons Attractive to states for both economic and political reasons Federal activists work with intergovernmental lobbying groups to determine how and when grants are awarded Federal activists work with intergovernmental lobbying groups to determine how and when grants are awarded

14 Federal-State Relations  Categorical grants: for specific purposes defined by federal law; often require local matching funds Examples: Examples:  Block grants: devoted to general purposes with few restrictions—states preferred block to categorical grants  Revenue sharing: requires no matching funds and can be spent on almost any governmental purpose  Look at p.65 for more information that you need to know!

15 Figure 3.2: The Changing Purpose of Federal Grants to State and Local Governments Budget of the U.S. Government, Fiscal Year 2005, table 12.2.

16 Table 3.1 Federal Grants to State and Local Governments (Federal Fiscal Year 2006)

17 Federal Aid and Federal Control  Mandates: federal rules that states or localities must obey, whether or not they accept federal grants When the federal government spends less on a preferred policy, it will pressure the states to spend more in that area When the federal government spends less on a preferred policy, it will pressure the states to spend more in that area  Conditions of aid: tell state governments what they must do if they wish to receive grant money

18 A Devolution Revolution?  During Reagan’s presidency, efforts were made to consolidate categorical grants and change them to larger “block grants”, which have fewer strings attached to them.  This was the beginning of the devolution effort, which aimed to pass down many federal functions to the states  Recent studies show that the success of devolution was limited

19 The Devolution Revolution  Second-order devolution: the flow of power and money from the states to local governments  Third-order devolution: the increased role of nonprofit organizations and private groups in policy implementation  See pgs for examples

20 Preemption  Express preemption: a federal law or regulation containing language explicitly displacing or superceding any conflicting state or local laws  Implied preemption: a federal law or regulation that directly conflicts with existing state laws, in the areas of intent or implementation  See pgs for examples

21 Congress and Federalism  Members of Congress represent conflicting constituencies  The erosion of parties increases political competition  Americans differ in the extent to which we like federal versus local decisions

22 Theories of Federalism  Dual federalism or “Layer Cake” Federalism  Cooperative federalism or “Marble Cake” Federalism  Regulated federalism  New federalism

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