Federalism

Federal
timulus

eeded Now!

30110

YES!
F ederal

Stimulus
Is needed Now!

LEA RN IN G
OBJ ECT IVES

LO

Explain what
federalism means,
how federalism differs
from other systems of
government, and why
it exists in the United
States.

L02 Indicate how

the Constitution divides
governing powers in our
federal system.

LOS Summarize the

evolution offederal
state relationships in the
United States over time.

L04 Descri be
developments in
federalism in recent
years.

LO

Explain what is

meant by the term fiscal

federalism.

.~

CourseMate
47

I[

Should the States

Lower the Drinking Age?

ur political system is a federal one in which power is shared between the states and t he federal
government. The Tenth Amendment to the U.S. Constitution reserves all powers not delegated to the national

government to the states and to the people. Nonetheless, the federal government has been able to exercise power over
matters that traditionally have been under the control of state governments, such as the minimum age for drinking alcoholic
beverages. The federal government has been able. to do so by its ability to give or withhold federal grants. The provision of
grants to the states by the federal government is known as fiscal federalism, and these grants give the federal government
considerable influence over state policies.
In the 1980s, for example, the national government wantedthe states to raise the minimum drinking ageto twenty-one
years. States that refused to do so were threatened with the loss of federal highway construction funds. The threat worked
it was not long before all of the states had changed their minimum-drinking-age Ilaws.ln the 1990s, Congress used the same
threat to encourage the states to lower their blood-alcohol limits for drunk driving to 0.08 percent by 2004. Again, states that
failed to comply faced reductions in federal highway funds.

It's Time to End This Charade

College Students Still Drink

nderage dri nking did not disappea r when the minim um-drinking-age

. Keep the Age-TweVJty-OVJe .

RequiremeVJt Because It's WorkiVJ0

got worse. Millions of young people today are, in effect, crimina ls, because

laws have 5i:jVed more than twenty thousand Ilves. The Nalional Transportation

they are breaking the law by dri nking. Moreover, the law encourages young

Safety Board, the Arnertcan Medical AssociatIOn, and me Insur<lnce Institute

requirement vvas raised to twenty-one years. Indeed, the problem

others AgalrlSt Drunk Driving (MADD) leads. the opposition to lowering

the drlnklng age. TIlat group contends that the CUrrent drink1ng-age

peopl e to binge in secret in order to avoid apprehension and prosecution

for Highway Safety all agree. After all, young persons' brainsare not fully devel"

by the local police. The minimum drinking age of twenty-one years has not

oped, so they are more susceptible to Alcohol. When the drinking age limit IS

reduced drun k driving among teenagers, becau se it is largely unenforceable.

twenty-one. it helps to protect young people tram being pressured to drink.

Additionally, it has bred contempt fo r the law in general among teenagers.

Teenagers who drink are adanger not ontyto themselves bUt also to othe(s

That is why a group of 135 U.s. co llege presidents and chancello rs endorsed

particularly when driving. Young people away at college must deal with

\he Amethyst Initiative, a movement calling for the reconsideration of US

enoug new responsibllltles.They don't need drinking as yet another problem.

drinki ng-age laws. Prohibition did not work in the 19205, and prohibiting

Fatalities involving eighteen- to twenty-year-oltJ drivers have decreased since

those under tvventy-one from drinking will not work in th e twenty-fi rst cen

the laws establishIng the minimum drinking age of twenty-one were enacted.

tury Almost no other country has such a high mini mum drinking age. It is

nleselaws are wor jng as planned, so we should keep them.

time to lower the drinking age everywhere in the Un ited States. Responsible
drinking can be taught through role modeling by parents and through edu
cational programs.

WHERE DO YO U STAND?
1. Is it appropriate to compare what happened during the era
of Prohibition, when all dri nki ng was illegal, to what is hap
J)ening to teenagers today, when the minimum drinking
age is twenty-one? Why or why not?
2. "One can join the military at the age of eighteen and die
for this country, so it is absurd not to allow those between
the ages of eighteen and twenty-one to drink:' Analyze this

statement.

48

EXPLORE THIS ISSUE ONLINE

Professor David Hanson, of the State University of New York
at Pot sdam, maintains a Web site that explores aJcohol
related issues, including the minimum-drinking-age con
troversy. You can find it at www2.p otsdam.edu/hansondj.
You can find an academic study of college-age drinking
by researchers at the Harvard School of Public Health at
www.hsp h.harvard.edu/cas/Documents/underminimum/
Drinking Behavior.pdf.
The Mothers Against Drunk Driving (MADD) site is at www.
madd.org. You can find a related organization, Students
Against Destructive Decisions (SADD), at www.sadd.org.

totalitarian regimes-have some

kind of subnational governmental
units. Thus, the existence of national
and subnational governmental units
by itself does not make a system fed
eral. For a system to be truly federal,
the powers of both the national units
and the sub national units must be
specified and limited. Under true fed
eralism, individuals are governed by

ederalism A system of shared

sovereignty between two levels of
gove rn ment-one national and one
subnationill-occupying the same
geographic region .

CHAPTER 3: FEDERALISM

49

can delegate certain activities to subna

tional units, The reverse is also true: the
Countries That Have
me
national government can take away, at
a Federal System Today
will, powers delegated to subnational
governmental units. In a unitary system,
Population
O"1te t;! a svs em A league of inde
(in Millions)
Country
any subnational government is a "crea
pe dent sovereign stares, joined together by a
ce, tra l governm ent that hasonly limited powers
Argentina
.41.3
ture of the national government." The
over thern .
governments
of Britain, France, Israel,
21.5
Australia
Japan,
and
the
Philippines are examples
8.2
Austria
of unitary systems. In the United States,
two separate governmental authorities
. 201.1
Brazil
beca use the Constitution does not
(national and state authorities) whose
33.8
Canada
mention
local governments (cities and
expressly designated powers cannot be
88.0
Ethiopia
counties),
we say that city and county
altered without changing the funda
82.3
Germany
governmental units are "creatures of
mental nature of the system-for exam
state government." That means that
1,173.1
India
ple, by amending a written constitution.
state
governments can-and do-both
Table 3-1 at right lists some of the
26.2
Malaysia
give
powers
to and take powers from
countries that the Central Intelligence
112.5
Mexico
local governments.
Agency has classified as having a federal
152.2
Nigeria
The Articles of Confedera tion cre
system of government.'
. Pakistan
177.3
ated a confederal system (see Chapter 2).
Federalism in theory is one thing;
7.6
Switzerland
In a confederal system, the national gov
federalism in practice is another. As
ernment
exists and operates only at the
310.2
United States
you will read shortly, the Constitution
direction of the su bna tional governments.
sets forth specific powers that can be
Venezuela
27.2
Few true confederal systems are in exis
exercised by the national government
SOLl(ce; Cen~'r~i l nte1ligence A.gef.lcy; The Worfd Fact
BDak;
cl:irreot
edirion
oniine
at
https:llwww.cla.
tence
today, although some people con
and provides that the national govern
gov/llbrary/pubticatlons/th.world-factbook.
tend
that
the European Union-a group
ment has the implied power to under
of twenry-seven European nations that
take actions necessary to carry out
has established many common institutions-qualifies as
its expressly designated powers. All other powers are
such a system.
"reserved" to the states. The broad language of the
:n . v'tem A centrali z d gove rnmental

Table 3-1'

system in which k;col or >ubdivision al govern m nts

exercise only those powe rs given 0 them by
central government .

Constitution, though, has left much room for debate

over the specific nature and scope of certain powers,
such as the national government's implied powers and
the powers reserved to the states. Thus, the actual work
ings of our federal form of government have depended,
to a great extent, on the historical application of the
broad principles outlined in the Constitution.
To further complicate matters, the term federal
government, as it is used today, refers to the national, or
central, government. When individuals talk of the fed
eral government, they mean the national government
based in Washington, D.C. They are not referring to the
federal system of government, which is made up of both
the national government and the state governments.

Alternatives to Federalism
Perhaps an easier way to define federalism is to discuss
what it is not. Most of the nations in the world today
have a unitary system of government. In such a sys
tem, the constitution vests all powers in the national
government. If the national government so chooses, it

50

PART 1: THE FOUNDATIONS OF OUR AMERICAN SYSTEM

Federalism-An Optimal
Choice for the United States?
The Articles of Confederation failed because they did
not allow for a sufficiently strong central government.
The framers of the Constitution, however, were fearful
of tyranny and a too-powerful central government. The
outcome had to be a compromise-a federal system.
The appeal of federalism was that it retained state
powers and local traditions while establishing a strong
national government capable of handling common
problems, such as national defense. A federal form of
government also furthered the goal of creating a divi
sion of powers (to be discussed shortly). There are other
reasons why the founders opted for a federal system,
and a federal structure of government continues to
offer many advantages (as well as some disadvantages)
for U.S. citizens.
ADVANTAG ES OF FED ERALI SM One of the reasons a
federal form of government is well suited to the United

Figure 3-1

federal system, state governments

can act as "laboratories" for
Governmental Units in the United States Today
public-policy experimentation.
For
example, many states have
The most common type of governmental unit in the United States is the special district, which
is generally concerned with a specific issue such as solid waste disposal, mass transportation,
adopted minimum wage laws that
or fire protection. Often, the jurisdiction of special districts crosses the boundaries of other
establish a higher minimum wage
governmental units, such as cities or counties. Special districts also tend to have fewer
than the one set by national leg
restrictions than other local governments as to how much debt they can incur and so are
islation. Several states, including
created to finance large building projects.
Hawaii and Massachusetts, have
experimented with health-care
PERCENTAGE OF ALL GOVERNMENTS
THE NUMBER OF GOVERNMENTS
IN THE UNITED STATES TODAY
IN THE UNITED STATES TODAY
programs that extend coverage to
Townships 18.451% . . ..... . : ... ... . ...;
most or all of the states' citizens.
School districts 14.578% .. . .........,
Depending on the outcome of a
Counties 3.388% .
Federal government
States (& D.C.) 0:057%
specific experiment, other states
Federal 0.001% '.,
State governments and
may (or may not) implement
District of Columbia
51
similar programs. State innova
Local governments
tions can also serve as models for
Counties
3,034
federal programs. For instance,
19,492
Municipalities
California was a pioneer in air
(mainly cities or towns)
pollution control. Many of that
16,519
Townships
state's regulations were later
(less extensive powers)
adapted byother states and even
37,381
Special districts
tually by the federal government.
(water, sewer, and so on)
We have always been a nation
School districts
13,051
of different political subcultures.
Subtotal local governments 89,476
The Pilgrims who founded N ew
Municipalities
21.772%
Total
89,528
England were different from
.. . ......... Special districts
41.753%
the settlers who established the
agricultural
society of the South.
OT(t?: u.s Census 6u(~au .
Both of these groups were differ
States is our country's large size. Even in the days when
ent from those who popula ted the Middle Atlantic states.
the United States consisted of only thirteen states, its
The groups that founded New England had a religious
geographic area was larger than that of England or
focus, while those who populated the Middle Atlantic
France. In those days, travel was slow and communi
states were more business oriented. Those who settled
cation was difficult, so people in outlying areas were
in the South were more individualistic than the other
isolated . The news of any particular political decision
groups. That is, they were less inclined to act as a collec
could take several weeks to reach everyone. Therefore,
tive and more inclined to act independently of each other.
even if the framers of the Constitution had wanted a
A federal system of government allows the political and
more centralized system (which most of them did not),
cultural interests of regional groups to be reflected in the
such a system would have been unworkable.
laws governing those groups.
Look at Figure 3-1 above. As you can see, to a great
As we noted earlier, nations other than the United
extent the practical business of governing this coun
States have benefited from the principle of federalism. One
try takes place in state and local governmental units.
of them is Canada, our neighbor to the north. Because
Federalism, by providing a multitude of arenas for deci
federalism permits the expression of varying regional
sion making, keeps government closer to the people and
cultures, Canadian federalism naturally differs from the
helps make democracy possible.
American version, as you will discover in this chapter's
The existence of numerous government subunits in
The Rest of the World feature on the following page.
the United States also makes it possible to experiment
with innovative policies and programs at the state or local
SOME DRAWB ACKS TO FEDERALI SM Federalism
level. Many observers, including Supreme Court justice
offers many advantages, but it also has some draw
Louis Brandeis (1856-1 941), have emphasized tha t in a
backs. Consider that although federalism in many ways

CHAPTER 3: FEDERALISM

51

TH E REST

OF THE

Canadian versus American Federal ism

C

has a federal system si~i1ar

some ways to that of the Umted
States-but a.lso with some big differ
ences. When the 1867 Constitution Act
created modern Canada, the United
States had just concluded the Civ!1 War.
Canada's founders blamedthatwar o n the
weakness of the U.S. central government.
Therefore, the Canadian constitution
gave far more power to the central gov
ernment than did the U.S. Constitution.
.

~nada

In

The Powers of
Lower-Level Governments
Our lower levels of government are
ca lled states, whereas in Canada they
are called provinces. Ri ght there, the
powers of the central government are
emphasized. The word state implies sov
ereignty. A province, however, is never
sovereign and is typically set up for the
convenience of the central government.
The U.S. Constitution limits the powers of
the national government to those listed
in Article I, Section 8. In t he Canadian
constitution, it is the powers of the prov
inces that are limited by a list. The Tenth
Amendment to the U.S. Constitution
reserves residual powers to the states or
to the people. In Canada, residual pow
ers rest with the nationa l government.
Under the 1867 Canadian constitution,

the central government could veto any

provincial legislation. No such clause
appears in the U.S. Constitution.

Changes Over Time

By land area, Canada is t he second-largest
country in the world. Most people live
along the southern edge of the nation,
where the climate is the most tolerable.
The populated areas of Cana da, there
fore, are like a ribbon extending from
the Atlantic to the Pacific. Physically, the
country seems designed for a federal
system of government.
Over time, the powers of the U.S. fed
eral government grew at the expense
of the states. The opposite happened in
Canada. By the end of the nineteenth
century, the Canadian government in
practice had abandoned the power
to veto provincial legislation. The dif
ference between the Canadian and
American experiences is well illustrated
by the effect of the Great Depression on
the federal system. In the United States,
the Depression strengthened the federal
government. In Canada, it strengthened
the provinces.

{I

For Critical Analysis The

Canadian constitution is based on the
principles of "peace, order, and good
government." Contrast that phrase
with the Preamble to the
U.S. Constitution. How do
the statements differ?

Two Languages
Another striking difference between
Canada and the United States is that

promotes greater self-rule, or democracy, some schol

ars point out that local self-rule may not always be in
society'S best interests. These observers argue that the
smaller the political unit, the higher the probability that
it will be dominated by a single political group, which
mayor may not be concerned with the welfare of many
of the local unit's citizens . For example, entrenched
segregationist politicians in southern states denied
African Americans their civil rights and voting rights
for decades, as we discuss further in Chapter 5.
Powerful state and local interests can block prog
ress and impede national plans. State and local interests

52

Canada has two nationa l languages. A

majority of Canadians speak English, but

most of the population of Quebec speaks

French. The Parti Quebecois (PQ), which

wants Quebec to be a separate country,

has gained power in that province twice.

Both times, it held referenda on whether
Quebec should demand "sovereignty
association;' a euphemism for indepen
dence. In 1995, the PQ almost o btained
a majority vote for its position. The party
has promised to hold another referen
dum if it returns to power. The possibil
ity exists, therefore, that Canada could
actually break apart.

PART 1: THE FOUNDATIONS OF OUR AMERICAN SYSTEM

often diverge from those of the national government.

For example, several of the states have recently been at
odds with the national government over how to address
the problem of global warming. Finding acceptable
solutions to such conflicts has not always been easy.
Indeed, as will be discussed shortly, in the 1860s, war
not politics-decided the outcome of a struggle over
states' rights.
Federalism has other drawbacks as well. One of
them is the lack of uniformity of state laws, which can
complicate business transactions that cross state bor
ders. Another problem is the difficulty of coordinating

government policies at the national, state, and local lev

els. Additionally, the simultaneous regulation of busi
ness by all levels of government creates red tape that
imposes substantial costs on the business community.
Finally, in a federal system, there is always the dan
ger that national power will be expanded at the expense
of the states. President Ronald Reagan (1981-1989)
once said, " T he Founding Fathers saw the federalist
system as constructed something like a masonry wall.
The States are the bricks, the national government is the
mortar. ... Unfortunately, over the years, many people
have increasingly come to believe that Washington is
the whole wall."2

o The Constitutional
Division of Powers
he founders created a federal form of government
by dividing sovereign powers into powers that
could be exercised by the national government and
powers that were to be reserved to the states. Although
there is no systematic explanation of this division of
powers between the national and state governments,
the original Constitution, along with its amendments,
provides statements on what the national and state gov
ernments can (and cannot) do.

The Powers of the National Government

The Constitution delegates certain powers to the
national government. It also prohibits the national gov
ernment from exercising certain powers.
POWERS DELEGATED TO THE NAT I ONAL
GOVERNMENT The national government possesses

three types of powers: expressed powers, implied pow

ers, and inherent powers. Article I, Section 8, of the
Constitution expressly enumerates twenty-seven pow
ers that Congress may exercise. Two of these expre ssed
powers, or enumerated powers, are the power to coin
money and the power to regulate interstate com
merce. Constitutional amendments have provided for
other expressed powers. For example, the Sixteenth
Amendment, added in 1913, gives Congress the power
to impose a federal income tax. Article II, Section 2, of
the Constitution expressly delegates certain powers to
the president. These powers include making treaties and
appointing certain federal officeholders. Laws enacted
by Congress can also have the effect of creating addi
tional expressed presidential powers.

iVlsion 0 powers
The
constitutional
A
basic principle of federalism es
basis for the im plied
tablished by the us omtitut ion,
powers of the national
by which powers are divided
government is found
between the federal and state
in Article I, Section 8,
governments
Clause 18, often called
expressed powers
the necessary and proper
Constituti onal or statu to ry powers
clause. This clause states
that are expressly provided for by
that Congress has the
the U.s. Constitution.
power to make " all Laws
Implied powers The pow
which shall be necessary
ers of the federal government
and proper for carrying
tha t are Implied by the expressed
into Execution the fore
powers in the Constitution, par
going [expressed] Powers,
ticularly in Article I. Section 8.
and all other Powers
necessary and proper
vested by this Constitution
clause Article I, Section 8,
in the Government of the
Clau se 18, of the Constrtution,
United States, or in any
wh icn givesCongress the power
Department or Officer
to make all laws"necessary an d
proper" for the federal govern
thereof." The necessary
ment to carry ou t its responslbili
and proper clause is often
I ties; also called the elastic clause.
referred to as the elastic
clause, because it gives
inhe ent powers The
elasticity to our constitu
powers of the national gov
ernment thal, although not
tional system.
i always expressly granted by the
The national govern
Constitution, are necessary to en
ment also enjoys certain
sure the nation's integrity and sur
inherent powers-pow
vival as a poli tical uni t. Inheren
ers that governments
powers include the power to
make treati es and the power to
must have simply to
ensure the nation's integ- I wage wa r or ma ke peace.
rity and survival as a
political unit. For example, any national government
must have the inherent ability to make treaties, regu
late immigration, acquire territory, wage war, and make
peace. While some inherent powers are also enumer
ated in the Constitution, such as the power to wage
war and make treaties, others are not. For example, the
Constitution does not speak of regulating immigration
or acquiring new territory. Although the national gov
ernment's inherent powers are few, they are important.

POWERS PROHIBITED TO THE NATIONAL

GOVERNMENT The Constitution expressly prohibits

the national government from undertaking cenain actions,

such as imposing taxes on exports, and from passing laws
restraining certain liberties, such as the freedom of speech
or religion. Most of these prohibited powers are listed in
Article I, Section 9, and in the first eight amendments to
the Constitution. Additionally, the national government
is implicitly prohibited from exercising powers, including

CHAPTER 3: FEDERALISM

53

of the Constitution, the outcome of disputes over the

extent of state powers often rests with the Court.
Article I,
Section 10, denies certain powers to sta te governments,
such as the power to tax goods that are transported
across state lines. States are also prohibited from enter
ing into treaties with other countries. In addition, the
Thirteenth, Fourteenth, Fifteenth, . ineteenth, Twenty
fourth, and Twenty-sixth Amendments prohibit certain
state actions. (The complete text of these amendments
is included in Appendix B.)
POWERS PROHIB ITED TO T H E STATES

the power to create a national pu blic school system,

that are not included among its expressed and implied
powers.

The Powers of the States

T he Tenth Amendment to the Constitution states that
powers that are not delegated to the national government
by the Constitution, nor prohibited to the states, "are
reserved to the States respectively, or to the people."
POLICE POWERS The Tenth Amendment thus gives
numerous powers to the states, including the power to
regulate commerce within their borders and the power
to maintain a state militia. In principle, each state has the
ability to regulate its internal affairs and to enact whatever
laws are necessary to protect the health, morals, safety,
and welfare of its people. These powers of the states are
called police powers. The establishment of public schools
and the regulation of marriage and divorce have tra
ditionally been considered to be entirely within the
purview of state and local governments.
Beca use the Tenth Amendment does not specify
what powers are reserved to the states, these pow
ers have been defined differently at different times
in our history. In periods of widespread support
for increased regulation by the na tional govern
ment, the Tenth Amendment tends to recede into the
background. When the tide turns the other way, the
Tenth Amendment is resurrected to justify arguments
su pporting increased
states' rights (see, for
')0 ic
owers The pow
example, the discussion
ers of a governmem body that
of the new federalism
enable it to creale laws for ril e
later in this chapter).
prote lion of the healrll. morals,
Because the United
safety, and welfare of the people.
In lhe United States, most police
States Supreme Court

powers are reservedto the states.

54

is the ultimate arbiter

PART 1: THE FOUNDATIONS OF OUR AMERICAN SYSTEM

Interstate Relations
The Constitution also contains provisions relating to
interstate relations . The states have constant commer
cial and social interactions among themselves, and these
interactions often do not directly involve the national
government. The relationships among the states in our
federal system of government are sometimes referred to
as horizontal federalism.
The Constitution outlines a number of rules for
interstate relations. For example, the Constitution 's
fu ll faith and credit clause requ ires each state to honor
every other state's public acts, records, and judicial
proceedings . The issue of gay marriage, howe ver, has
made this constitutional mandate difficult to follow. If
a gay couple legally married in Massachusetts moves
to a state that bans same-sex marriage, which state's
law takes priority? The federal government attempted
to answer that question through the 1996 Defense of
Marriage Act (DOMA), which provided that no state

and the negotiation of treaties. An

example of a concurrent power is
the power to tax. Both the states
and the national government
have the power to impose income
taxes-and a variety of other taxes.
Sta tes, however, are prohibi ted from
imposing tariffs (taxes on imported
goods), and as noted, the federal
government may not tax articles
exported by any state. Figure 3-2
on the following page, which sum
marizes the powers granted and
denied by the Constitution, lists
other concurrent powers.

The Supremacy Clause

is required to treat a relationship between persons of

the same sex as a marriage, even if the relationship is
considered a marriage in another state.
A second part of the law barred the national gov
ernment from recognizing same-sex marriages in states
that legalize them. In July 2010, however, a u.s. district
court judge threw out this part of DOMA and ruled
that the federal government was required to provide
marriage-based benefits to Massachusetts residents
who are joined in same-sex marriages. This ruling will
certainly be appealed, and ultimately, the United States
Supreme Court will have to decide this issue.
Horizontal federalism also includes agreements,
known as interstate compacts, among two or more states
to regulate the use or protection of certain resources,
such as water or oil and gas. California and Nevada, for
example, have formed an interstate compact to regulate
the use and protection of Lake Tahoe, which lies on the
border between those sta tes.

Concurrent Powers
Concurrent powers can be exercised by both the state
governments and the federal government. Generally,
a state's concurrent powers apply only within the
geographic area of the state and do not include func
tions that the Constitution delegates exclusively to the
national government, such as the coinage of money

The Constitution makes it clear

that the federal government holds
ultimate power. Article VI, Clause
2, known as the supremacy clause,
states that the u.s. Constitution and
the laws of the federal government
"shall be the supreme Law of the Land." In other words,
states cannot use their reserved or concurrent powers to
counter national policies. Whenever state or local offi
cers, such as judges or sheriffs, take office, they become
bound by an oath to support the u.s. Constitution .
National government power always takes precedence
over any conflicting state action .3

The Struggle
for Supremacy

LO

uch of the political and legal history of the United

States has involved conflicts between the suprem
acy of the national government and the de
sire of the states to preserve their sovereignty. The
most extreme example
of this conflict was the
oncurrent powers
Civil War in the 1860s.
Powers held by both the federal
Through the years, be
an d the state governments in a
cause of the Civil War
federal system.
and several important
supremacy clause Article
Supreme Court deci
VI, Clause 2, of (he Constitution,
sions, the national gov
which makes the Constitution
ernment has increased
an d federal laws suoerior to all
ItS power.
con flicting state and local laws.

CHAPTER 3: FEDERALISM

55

Figure 3- 2

The Constitutional Division of Powers

Th e Constitution grants certain powers to the national government and certain powers to the state governments, while denying them other
powers. Some powers, called concurrent powers, can be exercised at either the national or the state level, but generally the states can exercise
these powers only within their own borders.

PO WERS GRAN TED BY THE CONSTIT UTION

CONCURRENT

NATIONAL
*
*
*
*
*
*
*
*

To coin money
To co nduct foreign re lations
To regu late interstate commerce
To declare war
To raise and support the military
To establish post offices
To admit new states
Powers implied by the necessary
and proper c lause

STATE

* To levy and collect taxes

* To borrow money
* To make and enforce laws
* To establish courts
* To provide for the general welfare
* To charte r banks and corporati ons

*To regulate Intrasta e

commerce
To conduct electlans
Te provide for public eaIH1 , safety
welfare, and morals
To establish local governments
To ratify amendments to the
federal Constltuti n
To establis a s ate militia

*
*

PO W ERS DENIED BY THE CONSTITU TIO N

NATIONAL
* To tax articles exported
from any state

* To vi olate the BIU of Rights

* To change state
boundaries without consent
of the states in question

CONCURRENT

*To grant titles of nobili ty

* To permit slavery
*To deny citizens the right
to vote

Early u.s. Supreme Court Decisions

Two Supreme Court cases, both of which were decid ed
in the early 1800s, played a key role in establishing the
constitutional foundations for the supremacy of the
national government. Both decisions were iss ued while
John Marshall was chief justice of the Supreme Court.
In his thirty-four years as chief justice (1801-1835),
M arshall did much to establish the prestige and the
independence of the Court. In Marbury v. Madison,4
he clearly enu nciated the principle of judicial review,
which has since become an important part of the checks

56

PA RT 1: THE FOUNDATIONS OF OUR AMERICAN SYST EM

STATE
* To tax imports or exports
* To coin money

*To enterinto treaties

*To' impair obligations of contracts
*To abridge the p rivileges
or immunities of citizens or deny
due process an d equal
protection ot the laws

and balances in the American system of government.

Under his leadership, the Supreme Court also estab
lished , through the following cases, the superiority of
federal authority under the Constitution.
The Issue m
McCulloch v. Maryland,S a case decided in 1819, involved
both the necessary and proper clause and the supremacy
clause. When the state of M aryland imposed a tax on the
Baltimore branch of the Second Bank of the United Sta tes,
the branch's chief cashier, James McCulloch, declined to
pay the tax. The state court ruled that McCulloch had
McCULLOCH V. MARYLAND (1819 )

of the Land" would be empty rhetoric without meaning.

pay it, and the national government appealed to the
From that day on, Marshall's decision became the basis
United States Supreme Court. The case involved much
for strengthening the national government's power.
more than a question of taxes. At issue was whether
Congress had the authority under the Constitution's nec
GIBBONS V. OGDEN (1824) As Chapter 2 explained,
essary and proper cla use to charter and contri bute ca pital
Article I, Section 8, gives Congress the power
to the Second Bank of the United States. A sec
to regulate commerce "among the several
ond constitutional issue was also involved:
States." But the framers of the Constitution
If the bank was constitutional, could a
did not define the word commerce.
state [aX it? In other words, was a state
At issue in Gibbons v. Ogden 6 was
action that conflicted with a national
how the commerce clause should be
government action invalid under the
conlrary to lhe Constitution
defined and whether the national
supremacy clause?
is not law. "
government had the exclusive power
Chief Justice Marshall pointed out
- JO li N MA RSHA L L
to regulate commerce involving more
that no provision in the Constitution
CH EF JUSTI CE OF THE UNI TED STATES

than one state. The N ew York legis

SUP REME C OU RT

grants the national government the

18 0 1- 18 3 5
lature had given R obert LivingstOn
expressed power to form a national
and Robert Fulton the exclusive right to
bank. N evertheless, if establishing such a
operate steamboats in N ew York waters,
bank helps the national government exer
and Livingston and Fulton licensed Aaron
cise its expressed powers, then the authority
Ogden to operate a ferry between New York and
to do so could be implied. Marshall also said that
the necessary and proper clause included "all means that
New Jersey. Thomas Gibbons, who had a license from
are appropriate" to carry out "the legitimate ends" of the
the U.S. government to operate boats in interstate waters,
Consti tu tion.
decided to compete with Ogden, but he did so without
N ew York's permission. Ogden sued Gibbons in the New
Having established this doctrine of implied pow
York state courts and won. Gibbons appealed.
ers, Marshall then answered the other important consti
tutional question before the Court and established the
Chief Justice Marshall defined commerce as including
doctrine of national supremacy. Marshall declared that
all business dealings, including steamboat tra vel. M arshall
no state could use its taxing power to tax an arm of the
also stated that the power to regulate interstate commerce
national government. If it could, the Constitution's dec
was an exclusive national power and had no limitations
laration that the Constitution "shall be the supreme Law
other than those specifically found in the Constitution.
Since this 1824 decision, the national government has
John Marshall, chief justice
used the commerce cla use repeatedly to justify its regula
of the United States
tion of virtually all areas of economic activity.
to

"A LEGISLATIVE ACT

Supreme Court from 1801

to 1835, was Instrumen ta l

in establishing th e
supremacy of
the national

The Civil War-The

Ultimate Supremacy Battle
The great issue that provoked the Civil War (1861-1865 )
was the future of slavery. Because people in different sec
tions of the country had radically different beliefs about
slavery, the slavery issue took the form of a dispute over
states' rights versus national supremacy. The war brought
to a bloody climax the ideological debate that had been
outlined by the Federalist and Anti-Federalist factions
even before the Constitution was ratified.
As just discussed, the Supreme Court headed by
John Marshall interpreted the commerce clause in such
a way as to increase the power of the national govern
ment at the expense of state powers. By the late 1820s,
however, a shift back to states' rights had begun, and
the question of the regulation of commerce became

CHAPTER 3: FEDER A LISM

57

Perception versus Reality feature on

one of the major issues in federal-sta te
"We here
the facing page.
relations . When the national govern
high~ reso lve that ..
When the South was defeated
ment, in 1828 and 1832, passed
in the war, the idea that a state has
laws imposing tariffs (taxes) on
a right to secede from the Union
goods imported into the United
was defeated also. Although the
States, southern states objected,
Civil War occurred because of
believing that such ta xes were
and that governm ent of the people.
the South's desire for increased
against their interests.
by the peo ple. for the peop le. shall
states' rights, the result was
One southern state, South
not perish from the ea rth ."
just the opposite-an increase
Carolina, attempted to nullify
- ABRA HAM Ll NCO l , .
in
the political power of the
the tariffs, or to make them
GETT YSBU RG A DDR ES S
18 63
na tional government.
void. South Carolina claimed
that in conflicts between state
governments and the national gov
Dual Federalism-From
ernment, the states should have the
the Civil War to the 19305
ultimate authority to determine the wel
Scholars have devised various models to
fare of their citizens. President Andrew Jackson
describe the relationship between the states and the
was prepared to use force to uphold national law, but
national government at different times in our history.
Congress reduced the tariffs. The crisis passed.
These models are useful in describing the evolution of
Additionally, some Southerners believed that dem
federalism after the Civil War.
ocratic decisions could be made only when all the seg
The model of dual federa lism assumes that the
ments of society affected by those decisions were in
states and the national government are more or less
agreement. Without such agreement, a decision should
equals, with each level of government having separate
not be binding on those whose interests it violates. This
and distinct functions and responsibilities. The states
view was used to justify the secession-withdrawal-of
exercise sovereign powers over certain matters, and the
the southern states from the Union in 1860 and 186l.
national government exercises sovereign powers over
The defense of slavery and the promotion of states'
others.
rights were both important elements in the South's
decision to secede, and the two concepts were com
mingled in the minds of Southerners of that era. Which
The Civil War is known in the South as the War between the
of these two was the more important remains a matter
State s, but the official Union designation wa s the War of the
of controversy even today. Modern defenders of states'
Reb e llion. The first shot of the Civil War was fired on April 12,
rights and those who distrust governmental authority
'861 , at Fort Sumter, South Carolina.
often present southern secession as entirely a matter
of states' rights. Liberals and those who champion the
rights of African Americans see slavery as the sole
ca use of the crisis. Economic
historians can provide help
ful insights into the back
ground to secession, as you
will learn in this chapter's

THIS NATION .. SHALL HAVE

ANEW BIRTH OF FREEDOM;

e !.sion The act of formally

wlthdrawmg from memberShip
in an alli~n(e; he withd rawal of a
slate from the federal Unon.
ual eaera Ism A system
of government in which the fed
eral and the slate govern ments
mamtam divers e but sovereign
powers.

58

PART 1: THE FOUNDATIONS OF OUR AMERICAN SYSTEM

The Civil War imposed great destruction on the

South. The Union Army burned Atlanta, Columbia,

and Richmond. General Philip Sheridan's cavalry

famously destroyed the farms and railroads of Virginia's

Shenandoah Valley. In addition to the loss. of human life,

the South lost livestock, houses, barns, railroads, and

bridges. In the cities, Union forces destroyed factories,

warehouses, and transportation equipment.

The Perception
he common perception of the South's condition after the
Civil War has been heavily influenced by the suffering
depicted in Gone with the Wind and other popular works. Many
Americans have long believed that the destruction of south
ern wealth by the war made economic recovery impossible.
Fu rthermore, although it was inevitable and proper that the
slaves were freed, the North did not compensate the former
slave owners for their losses. This immediately destroyed bil
lions of dollars worth of southern capital.

The Reality

he industrial parts of the South actually recovered quite

rapidly. For example, by 1867, the railroads between
Washington, D.C., and Charleston, South Carolina, were as good
as they had been before the war. By 1869, total manufacturing
output and investment exceeded their prewar levels.
The South's problem lay in its cotton-based agriculture. You
have heard aboutthe huge bubble in housing prices that helped
cause the recent Great Recession. There have been many bub
bles in the. past as well. In the 1850s, the world experienced a
cotton bubble. High prices for cotton led to a bubble in the price
of slaves. Slave owners believed that even if Abraham Lincoln
swore not to interfere with slavery in the states, his presidency
still threatened the price of slaves. Secession would serve as a
protection. The North could not possibly risk a "war on cotton;'
and if it did, cotton-dependent Britain would intervene on the

For much of our nation's history, this model of fed

eralism prevailed. Certainly, after the Civil War the courts
tended to support the states' rights to exercise their police
powers and tended to strictly limit the powers of the fed
eral government under the commerce clause. In 1918, for

example, the Supreme Court ruled unconstitutional a 1916

The Mississippiin Time of War, circa 1865, by Currier and Ives.

side of the South. As a southern lady wrote to her daughters,

"civil war was foreign to the original plan."7
In fact, just before the war, the price of cotton started to
fall due to overproduction of cotton textiles. British per-capita
consumption of cotton goods did not exceed 1860 levels until
after World War I. As a result, after the Civil War, cotton prices
fe ll until almost the end of the century. The Civil War masked
the fact that the cotton bubble had burst. Ultra-low cotton
prices-with no good economic alternatives for southern
farmers-were the true source of the post-Civil War economic
distress, not the devastation caused by the Union Army.

. , 810g On For a vast collection of Civil War

materials, see Shotgun's Home ofthe American Civil
War at www.civ ilwarhome.com . For economic
history, try eh.net, a Web site supported by the
Economic History Association. One of the site's most
popular services lets you convert modern prices into
those of any past year, or vice versa.

federal law excluding from interstate commerce the prod

ucts created through the use of child labor. The law was
held unconstitutional because it attempted to regulate a
local problem. 8 The era of dual federalism came to an end
in the 1930s, when the United States was in the depths of
the greatest economic depression it had ever experienced.

CHAPTER 3: FEDERALISM

59

In a 1938 radio broadcast, President

Franklin D. Roosevelt called upon the
nation's voters to elect New Deal
candidates. The Roosevelt
administrat.ion's New Deal
programs were an attempt
to mitigate th e effects of
the Great Depression.

Cooperative Federalism and the

Growth of the National Government
The model of coope rative federa lism, as the term implies,
involves cooperation by all branches of government. This
model views the national and state governments as com
plementary parts of a single governmental mechanism,
the purpose of which is to solve the problems facing the
entire United States. For example, federal law enforce
ment agencies, such as the Federal Bureau ofInvestigation,
lend technical expertise to solve local crimes, and local
officials cooperate with federal agencies.
Cooperative federalism grew out of the need to solve
the
pressmg
national
problems caused by the
c:oopera jve eder " m
Great Depression, which
The theory that the states and
began in 1929. To help
he federal government should
bring the United States
coopera te in solving problems.
out of the Depression,
e
eal The policies
President
Franklin
D.
ushered in by the Roo sevelt dRoosevelt
(1933-1945)
ministration in 1933 in an attempt
launched his New Deal,
to bring the Un iteo States out or
which
involved
many
Ihe Great Depression. The New
Deal included many government
government-spending and
pending and public-assistance
public-assistance programs.
progra ms, in additi on to thou
Roosevelt's N ew Deal leg
ands of regulation s governi ng
islation not only ushered
economic activity.
in an era of cooperative
j . e
enc.
jer Isr
federalism, which has more
A model offedera!ism in which
or less continued until the
specific policies and programs
present day, but also marked
are administered by all lev Is of
the real beginning of an era
gove rnment- national, stare,

of national supremacy.

dnd local.

60

PART 1: THE FOUNDATIONS OF OUR AMERICAN SYSTEM

Before the period of cooperative federalism

could be truly established, it was necessary to obtain
the concurrence of the United States Supreme
Court. As mentioned, in the early part of
the twentieth century, the Court held
a very restrictive view of what
the federal government could do
under the commerce clause.
In the 1930s, the Court
ruled again and again that
various economic measures
were unconstitutional. In
1937, Roosevelt threat
ened to "pack" the
court with up to six
new members who
presumably would
be more favorable
to
federal action_
This move was widely considered to be an assault on the
Constitution, and Congress refused to support it. Clearly,
however, the Court got the message: after 1937, it ceased
its attempts to limit the scope of the commerce clause.
COOPERATIVE FEDERALISM AND THE WELFARE
STATE T he 1960s and 1970s saw an even greater
expansion of the national government's role in domes
tic policy. The Great Society legislation of President
Lyndon Johnson's administration (1963-1969) created
Medicaid, Medicare, the Job Corps, Operation Head
Start, and other programs. The Civil Rights Act of
1964 prohibited discrimination in public accommoda
tions, employment, and other areas on the basis of race,
color, national origin, religion, or gender. In the 1970s,
national laws protecting consumers, employees, and the
environment imposed further regulations on the econ
omy. Today, few activities are beyond the reach of the
regulatory arm of the national government.
....:onetheless, the massive social programs under
taken in the 1960s and 1970s also precipitated greater
involvement by state and local governments. The
national government simply could not implement those
programs alone. For example, Head Start, a program
that provides preschool services to children of low
income families, is administered by local nonprofit
organizations and school systems, although it is funded
by federal grants. The model in which every level of
government is involved in implementing a policy is
sometimes referred to as picket-fence federalism. In this
model, the policy area is the vertical picket on the fence,
while the levels of government are the horizontal sup
port boards. America's welfare system has relied on this

years, though, the Su preme Court has, for the

first time since the 1930s, occasionally curbed
Congress's regulatory powers under the com
merce clause. You will read more about this
development shortly.
John Marshall's validation of the suprem
acy clause of the Constitution has also had
significant consequences for federalism. One
important effect of the supremacy clause today
is that the clause allows for federal preemption
of certain areas in which the national govern
ment and the states have concurrent powers.
When Congress chooses to act exclusively in
an area in which the states and the national
government have concurrent powers, Congress
is said to have preempted the area. In such
cases, the courts have held that a valid federal
law or regulation takes precedence over a con
flicting state or local law or regulation covering
the same general activity.

Federalism Today
model of federalism, although, as you will read, from
time to time there have been attempts to give more
power to state and local governments.
UNITED STATES SUPR EM E COURT D ECISION S AND
COOPERATIVE FEDERALISM The two United States

Supreme Court decisions discussed earlier, McCulloch

v. Maryland and Gibbons v. Ogden, became the consti
tutional cornerstone of the regulatory powers that the
national government enjoys today. From 1937 on, the
Supreme Court consistently upheld Congress's power to
regulate domestic policy under the commerce clause. Even
activities that occur entirely within a state were rarely
considered to be outside the regulatory power of the
national government. For example, in 1942 the Supreme
Court held that wheat production by an individual farmer
intended wholly for consumption on his own farm was
subject to federal regulation because the home consump
tion of wheat reduced the demand for wheat and thus
could have an effect on interstate commerce.9
In 1980, the Supreme Court acknowledged that the
commerce clause had "long been interpreted to extend
beyond activities actually in interstate commerce to
reach other activities that, while wholly local in nature,
nevertheless substantially affect interstate commerce."10
Today, Congress can regulate almost any kind of eco
nomic activity, no matter where it occurs. In recent

y the 1970s, some Americans had begun to

question whether the national government
had acquired too many powers. Had the
national government gotten too big? Had it become, in
fact, a threat to the power of the states and the liberties
of the people? Should steps be taken to reduce the regula
tory power and scope of the national government? Since
that time, the model of federalism has evolved in ways that
reflect these and other concerns.

The New Federalism

More Power to the States
Starting in the 1970s, several
to revitalize the doctrine
of dual federalism, which
they renamed the "new i
federalism." The new
federalism involved a shift i
from nation-centered fed
eralism to state-centered
federalism. One of the
major goals of the new
federalism was to return to
the states certain powers
that had been exercised by
the national government
since the 1930s. The term

administrations attempted
preemption A doctrine
rooted in th e supremacy clause
of the Cons titu tion that provides
that n(ltionallaws or regu lations
governing acertain area take
precedence over con flicti ng slate
lawsor regu lations governing
that same area.

new f,'derarsm A plan to

limi t .he federal government's role
in regUlating slate govern ments
and to give the states increased
power to decide how they should
spend government revenues.

CHAPTER 3: FEDERALISM

t.

61

I
II
:1
r

devolution-the transfer of powers to political subunits

is often used to describe this process. Although a prod

uct of conservative thought and initiated by Republicans,
the devolutionary goals of the new federalism were also
espoused by the Clinton administration (1993-2001). An
example of the new federalism is the welfare reform legis
lation passed by Congress in 1996, which gave the states
more authority over welfare programs.

The Supreme Court

and the New Federalism

During and since the 1990s, the Supreme Court has played
a significant role in furthering the cause of states' rights.
In a landmark 1995 decision, United States v. Lopez,ll the
Supreme Court held, for the first time in si:h'ly years, that
Congress had exceeded its constitutional authority under
the commerce clause. The Court concluded that the Gun
Free School Zones Act of 1990, which banned the pos
session of guns within one thousand feet of any school,
was unconstitutional because it attempted to regulate an
area that had "nothing to do with commerce." In a signifi
cant 1997 decision, the Court struck down portions of the
Brady Handgun Violence Prevention Act of 1993, which
obligated state and local law enforcement officers to do
background checks on prospective handgun buyers until a
national instant check system could be implemented. The
Court stated that Congress lacked the power to "dragoon"
state employees into federal service through an unfunded
federal mandate of this kind. 12
Since then, the Court has continued to limit the
national government's regulatory powers. In 2000, for
example, the Court invalidated a key provision of the
federal Violence Against Women Act of 1994, which
allowed women to sue in federal court when they were
victims of gender-motivated violence, such as rape. The
Court upheld a federal appellate court's ruling that the
commerce clause did not justify national regulation of
noneconomic, criminal conduct. \3
In the twenty-first century, the United States
Supreme Court has been less noticeably guided by an
ideology of states' rights,
but some of its decisions
vol:utlon The surrender
ha ve had the effect of
or transfer of powers to local au
thoritie s by a cent al government.

'e

r,,1 ma Qat

A
requirement in federa l legislation
that forces state s and municipali
ties to comply with certain I ules.
If the federal government does
not provide funos to the state,
to cover the costs of compliance,
fhe man date IS referred to as an
unfunded m ndate.

62

enhancing the power of

the states. For example, in
one case, Massachusetts v.
Environmental Protection
Agency,14 MassachusettS
and several other states
sued the Environmental
Protection Agency (EPA)
for failing to regulate

PART 1: THE FOUNDATIONS O F OUR AMERICAN SYSTEM

greenhouse-gas emissions. The states asserted that the

agency was reg uired to do so by the Clean Air Act of
1990. The EPA argued that it lacked the authority under
the Clean Air Act to regulate greenhouse-gas emissions
alleged to promote global warming. The Court ruled fo r
the states, holding that the EPA did have the authority to
regulate such emissions and should take steps to do so.

The Shifting Boundary

between Federal and State Authority
Clearly, the boundary between federal and state authority
has been shifting. Notably, issues relating to the federal
structure of our government, which at one time were not
at the forefront of the political arena, have in recent years
been the subject of heated debate among Americans and
their leaders. The federal government and the states seem
to be in a constant tug-of-war over federal regulation,
federal programs, and federal demands on the states.
The Republican
Party is often viewed as the champion of states' rights.
Certainly, the party has claimed such a role. For example,
when the Republicans took control of both chambers of
Congress in 1995, they promised devolution- which,
as alread y noted, refers to a shifting of power from the
national level to the individual states. Smaller central
government and a state-centered federalism have long
been regarded as the twin pillars of Republican ideol
ogy. In contrast, Democrats usually have sought greater
centralization of power in Washington, D.C.
Since the Clinton administration, however, the party
tables seem to have turned. As mentioned earlier, it was
under Clinton that welfare reform legislation giving more
responsibility to the states-a goal that had been endorsed
by the Republicans for some time-became a reality.
Conversely, the No Child Left Behind Act of 2001, passed
at the request of Republican president George W. Bush,
THE POLITICS OF FEDERALISM

Is Obamacare Unconstitutional?
n 2010, President Obama signed into law the most signifi
cant legislation in decades concerning health care. Some
were elated by passage of the legislation, nicknamed
"Obamacare:' Others were aghast. Some who opposed the
new law are raising constitutional issues-twenty state attor
ney genera ls have joined together in a suit against the federal
government. Others, Including those who favor Obamacare,
are convinced that no constitutional issues are involved.

Tile Governm ent Can't

Force Us to Buy Anything
The reasoning of those who believe Obamacare is lmcon
stitutional runs as follows: It is true that state governments
have the right to require, for example, drivers to buy auto
mobile insurance to travel on the public streets. Nothing
in the Constitution, in contrast, gives the federal govern
ment the right to im pose such requirements. The new
laws demand that everyone in the United States purchase
hea lth-care insurance or be fin ed. The Internal Revenue
Servlce will enforce th is law. While the commerce clause
allows the federal government to regulate interstate com
merce, it has never been used t-o require citizens to buy any
serVice or good. Another constitutional argument agai nst
the reforms is thata requirement to buy insurance violates
the Fifth Amendment'S right to due process.
Further constitutiohal challenges are based on states'
rights. Some states have passed legislation barring any
of their citizens from being required to pu rchase medi
cal Insurance. A suit by Plorida clai ms that the Medicare
expansion provided by the law improperly com mandeers
state officials. The battle between the states and the fed
eral government is not new. Sometimes the Supreme
Court has supported states' rights. Sometimes it has n't

gave the federal government a much greater role in edu

cation and educational funding than ever before. Many
Republicans also supported a constitutional amendment
that would ban same-sex marriages nationwide. Liberals,
recognizing that it was possible to win support for same
sex marriages only in a limited number of states, took a
states' rights position on this issue. Finally, consider that
the Bush administration made repeated attempts to block
California's medical-marijuana initiative and Oregon's
physician-assisted suicide law.

OBAMA AND FEDERALISM The position of the

Obama administration has been more ambiguous.
Obama has certainly championed measures that

There Is No Constitutional Basis for a Challenge

Proponents of health-care reform argue that the consti
tutiona l challenges to the new legislation are smoke an
mirrors. C(!)ngress has spoken-all Americans will eventu
ally have access to medical care. For this to occur, almost all
Americans will need to have health insurance of one form or
another. Otherwise, those who do have health insurance will
pay higher premiums to make up for the missing premiums
of those that don't have insurance.The "requirement"to buyj
insurance simply amounts to a tax on those who do not bu
it. It's assumed that some people will pay thetax and go with
out insurance.The courts havealway.s held that Congress can
place tax incentives In the Internal Revenue Code.
As for states' rights, that's an old argument brought
up every time some people don't like new legislation.
In fact, the supremacy of nationa l law was established
in 1819 by McCulloch v. Maryland, and fhe breadth 0
the commerce clause was settled in 1824 by Gibbons v.
Ogden. (See pages 56 and 57.) If constitutional argu~
meIlts against the new legJslatlon make it all the way to
the United States Supreme Court, they will be rejected
probably on a l1ine-to-zero vote.

For Critical Analysis Who will gain and who will

lose because of the new health-care legislation?

increase the role of government in society, but the n

laws have not necessarily shifted power from the sta
to the federal government. Obama's opponents, ho
ever, have frequently invoked states' rights in oppc
tion to such legislation as the health-care reform bi
Officials in a number of states have filed suits c1aimi
that "Obamacare" is unconstitutional. Do these Sl
have any chance of succeeding? We examine that qu
tion in this chapter's Join the Debate fea ture above.

FEDERALISM AND THE " WAR ON TERRORISM"

modern times, terrorism-the use of violence to intir
date or coerce-has become so large-scale and t
claimed so many victims that it is hard to consider it
CHAPTER 3: FEDERALISM

As with the implementation of any national

policy, the requirements imposed on the
states to support homeland security were
costly. Firefighting departments needed more
equipment and training. Emergency commu
nications equipment had to be purchased.
State and local governments were required to
secure ports, ensure water safety and airport
security, install new bomb-detecting equip
ment, and take a multitude of other steps.
Since 9/11, almost every state law enforcement
agency and a bout a quarter of local agencies
(most of them in larger cities) have: formed
specialized antiterrorism units. Although the
federal government has provided funds to the
states to cover some of these expenses, much
of the cost of homeland security is borne by
the states.
The wars in Afghanistan and Iraq also
depleted the ranks of state and local police,
firefighters, and other emergency personnel.
Many individuals working in these areas
were also in the National Guard and were
called up to active duty.

ordinary crime. Terrorism has many of the character

istics of war, not just of crime-hence the term war on
ter1'Orism. Unlike war, however, terrorism involves non
governmental actors. Some authorities suggest thinking
of terrorism as a "supercrime." l5
The U.S. Constitution gives Congress the power
and authority to provide for the common defense.
Nevertheless, most of the burden of homeland defense
falls on state and local governments. These govern
ments are the "first responders" to crises, including ter
rorist attacks. Additionally, state and local governments
are responsible for detecting, preparing for, preventing,
and recovering from attacks.
After the terrorist attacks of September 11, 2001,
the Bush administration increased demands on state and
local governments to participate in homeland security.

64

PART 1 : THE FOUNDATIONS OF OUR AMERICAN SYSTEM

FEDERALISM AND THE ECONOMIC CRISIS

Unlike the federal government, state govern
ments are required to balance their budgets.
This requirement is written into the consti
tution of every state except Vermont. Such
requirements do not, of course, prevent the
states from borrowing money, but typically
when a state borrows it must follow a strict
series of rules laid down in its constitution.
Frequently, a vote of the people is required
before a state or local government can go into debt by
issuing bonds . In contrast, when the federal government
runs a budget deficit, the borrowing that results takes
place almost automatically-the U.S. Treasury continu
ally issues new Treasury bonds.
A practical result is that when a major recession
occurs, the states are faced with severe budget prob
lems. Because state citizens are earning and spending
less, state income and sales taxes fall. At the same time,
people who have lost their jobs require more state
services. The costs of welfare, unemployment com
pensation, and Medicaid (health care for low-income
persons) all rise. During a recession, state governments
may be forced either to reduce spending and layoff
staff-or to raise ta xes. Either choice helps make the
recession worse. State spending patterns tend to make

"GIVING MONEY AND

POWER TO GOVERNMENT

by one level of government (typically

economic booms more energetic and
the national government) and spent
busts more painful-in a word, they
by another level (typically state or
are pro cyclical.
local governments), we call the pro
Unlike the states, the federal
is like giving whiskey and
cess fiscal federalism.
government has no difficulty in
car keys to teenage boys"
spending more on welfare, unem
- O.J. O ' RO U R KF
ployment
compensation,
and
AMER IC A N HUM O 1ST
Federal Grants
' 9 4 7- PRESE N T
Medicaid during a recession. Even
Even before the Constitution was
though revenue raised through the
adopted, the national government
federal income tax may fall, the federal
granted lands to the states to finance
government often cuts tax rates in a reces
education. Using the proceeds from the sale
sion to spur the economy. It makes up the
of these lands, the states were able to establish
difference by going further into debt, an option
elementary schools and, later, land-grant colleges. Cash
not available to the states. The federal government even
grants started in 1808, when Congress gave money to
has the power to reduce its debt by issuing new money,
the states to pay for the state militias. Federal grants
as you learned in the Our Government Faces a Troubled
were also made available for other purposes, such as
Economy feature in Chapter 2 on page 40. In a reces
building roads and railroads.
sion, the actions of the federal government are normally
Only in the twentieth century, though, did federal
anticyclical.
grants become an important source of funds to the
One method of dealing with the procyclical nature
states. The major growth began in the 1960s, when the
of state spending is to increase federal grants to the
states during a recession. For more details on how that
dollar amount of grants quadrupled to help pay for
the Great Society programs of the Johnson administra
can work, see this chapter's Our Government Faces a
tion. Grants became available for education, pollution
Troubled Economy feature on the following page.
control, conservation, recreation, highway construction
and maintenance, and other purposes.
LO
There are two basic types of federal grants: cat
egorical grants and block grants. A categorical grant
is targeted for a specific purpose as defined by federal
law-the federal government defines hundreds of cat
ince the advent of cooperative federalism in the 1930s,
egories of state and local spending. Categorical grants
the national government and the states have worked
give the national government control over how states use
hand in hand to implement programs mandated by
the money by imposing certain conditions. For example,
the national government. Whenever Congress passes a
a categorical grant may require that the funds not be
law that preempts a certain area, the states are, of course,
used for purposes that discriminate against any group
obligated to comply with the requirements of that law.
or for construction projects that pay below the local
As already noted, a requirement that a state provide a
prevailing wage. Depending on the project, the govern
service or undertake some activity to meet standards
ment might require that
specified by a federal law is called a federal mandate.
an environmental impact
,scal Tedera IS
The
Many federal mandates concern civil rights or environ
statement be prepared.
allocation 01taxes col lected by

mental protection. Recent federal mandates require the

In contrast, a block
one level or government (typi

states to ptovide persons with disabilities with access to

grant is given for a broad
cally the nan nal govern men t)

to another level (typically state or

public buildings, sidewalks, and other areas; to establish
area, such as criminal
locai
govern ments).
minimum water-purity and air-purity standards; and to
justice or mental-health
extend Medicaid coverage to all poor children.
programs. First issued in
r tegorl\. I
ra t A fe
To help the states pay for some of the costs associ
1966, block grants now
eraI gra nt targeted for a speCific
ilurpose 35defined by federal law.
ated with implementing national policies, the national
constitute a growing per
government gives back some of the tax dollars it col
centage of all federal aid
loc ra
A federal grant
lects to the states-in the form of grants. As you will
programs. A block grant
given to a state for a broad area,
see, the states have come to depend on grants as an
gives the states more dis
such as cri minal justi e or mental
important source of revenue. When taxes are collected
cretion over how the funds
health program s.

The Fiscal
Side ofFederalism

CHAPTER 3: FEDERALISM

65

the states must comply-but

compliance with federal man
dates can be costly. The esti
mated total cost of complying
with federal mandates to the
states in the 2000s has been
calculated as $29 billion annu
ally. Although Congress passed
legislation in 1995 to curb the
use of unfunded federal man
dates, that legislation was
more rhetoric than reality.

Competitive
Federalism

As mentioned, when the national government passes

a law preempting an area in which the states and the
national government have concurrent powers, the states
must comply with that law in accordance with the
supremacy clause of the Constitution. Thus, when such

The debate over federalism is

sometimes reduced to a debate
over taxes. Which level of gov
ernmen t will raise taxes to pay
for government programs, and which will cut services
to avoid raising taxes?
How states answer that question gives citizens an
option: they can move to a state with fewer services
and lower taxes, or to a state with more services but
higher taxes. Political scientist Thomas R. Dye calls
this model of federalism competitive federalism. State
and local governments compete for businesses and
citizens. If the state of Ohio offers tax advantages for
locating a factory there, for example, a business may
be more likely to build its factory in Ohio, providing
more jobs for Ohio residents. If Ohio has very strict
environmental regulations, however, that same business
may choose not to build there, no matter how beneficial
the tax advantages, because complying with the regula
tions would be costly. Although Ohio citizens lose the
opportunity for more jobs, they may enjoy better air
and water quality than citizens of the state where the
new factory is ultimately built.
Some observers consider such competition an
advantage: Americans have several variables to con
sider when they choose a sta te in which to live. Others
consider it a disadvan
tage: a state that offers
more social services or
competitive federalism
model of federalism devised
lower taxes may experiby
Thomas R. Dye in whic h state
ence an 1[1crease 1[1 pop
and local govern ments compete
ulation as people "vote
for businesses and ci [izens, who
with their feet" to take
in effect "vote with their feet" by
advantage of that state's
moving to jurisdictions tha t offer

laws require the states to implement certain programs,

laws. This population

Tenth Amendment reserves all powers not delegated to

the national government to the states and to the people.
You might well wonder, then, how the federal govern
ment has been able to exercise control over matters
that traditionally have been under the control of state
governments, such as the minimum drinking age. The
answer involves the giving or withholding of federal
grant dollars.
For example, as noted in the America at Odds
feature at the beginning of this chapter, the national
government forced the states to raise the minimum
drinking age to twenty-one by threatening to withhold
federal highway funds from states that did not com
ply. The education reforms embodied in the No Child
Left Behind (NCLB) Act also rely on federal funding for
their implementation. The states receive block grants
for educational purposes and, in return, must meet fed
erally imposed standards for testing and accountabil
ity. A common complaint, however, is that the existing
N CLB Act is an underfunded federal mandate. Critics
argue that the national government does not provide
sufficient funds to implement it.

The Cost of Federal Mandates

acompetitive advantage.

CHAPTER 3: FEDERALISM

67

Fighting a Recession with

Government Spending

In an attempt to prevent the Great Recession from

turning into another Great Depression, President Barack
Obama called for massive stimulus legislation in 2009.
He and his advisers believed that fiscal policy can have
profound effects on the nation's economy. Fiscal policy
refers to changes in government taxes and spending.
The logic behind fiscal policy is straightforward.

almost total freedom to come up with a bill, as long as they

did it fast. Indeed, Congress came up with a massive stimulus
bill, initially valued at $787 billion, in record time. How could
Congress write a bill so quickly7
State and local governments make grant proposals on a
continuing basis. Thousands of such proposals from state and
local governments were already in hand. Obama therefore
promised the American people that the stimulus bill would
concentrate on "shovel-ready" projects-state and local

When unemployment is rising and the economy is in

projects that were ready to be started immediately upon the

a recession, fiscal policy should stimulate economic

receipt of federal funds.

activity by increasing government spending,

decreasing tax rates, or both. When unemployment is
falling and prices are rising-when there is inflation
the government should curb excessive economic
activity by reducing spending, increasing taxes, or
both. In other words, the government's budget deficit
should rise in a recession and fall in a boom. This view
of fiscal policy is based on the theories of the British
economist John Maynard Keynes (1883-1946). It's
worth noting, by the way, that not all economists
agree with Keynes.

Making Grants to the States

t can take a while for the government to realize that a
recession has begun. It takes more time for a bill authoriz

ing a tax cut or spending increase to work its way through

Congress. It takes still more time for the change in taxation or
spending to have an effect. By the time fiscal policy is actually
stimulating the economy, the recession may be over. Obama
moved quickly, however. He gave the Democrats in Congress

What the Stimulus Really Funded

merica has thousands of bridges that need repair, high

ways that need resurfaCing, and other serious infrastruc

ture problems. Of the $787 billion, however, $264 billion was

devoted to tax cuts (mostly for individuals), and the rest to
spending. Infrastructure received less than $100 billion.
Unemployment compensation, food stamps, and other pro
grams totaled more than $100 billion. Health care received
about $150 billion-most of it paid to the states-and edu
cation received roughly another $100 billion.
Those economists who supported the stimulus believe
that it did have a positive effect on the economy. Clearly,
however, it did not solve the unemployment problem. By
2010, the unemployment rate was still almost 10 percent. To
the extent that the stimulus had an impact on employment,
it reduced layoffs rather than creating new jobs. It especially
saved the jobs of health-care workers, teachers, and other
state government employees. Spending fueled by tax cuts
and unemployment compensation presumably saved some
jobs as well, but it was impossible to identify who benefited.
As a result, the effects of the stimulus were largely invisible.
Most voters concluded that the stimulus had no effect.

You Be t he Judge Businesstax reductions in the stimulus bill amounted to only $32 billion. Why do you think
Obama was reluctant to cut business tax rates further?

will be spent. Nonetheless, the federal government can

exercise control over state decision making through these
grants by using cross-cutting requirements, or require
ments that apply to all federal grants. Title VI of the 1964
Civil Rights Act, for example, bars discrimination in the
use of all federal funds, regardless of their source.

66

PART 1 : THE FOUNDATIONS OF OUR AMERICAN SYSTEM

Using Federal Grants

to Control the States
Grants of funds to the states from the national govern
ment are one way that the Tenth Amendment to the
U.S. Constitution can be bridged. Remember that the

increase can overwhelm the state's resources and force

it to cut social services or raise taxes.
It appears likely, then, that the deb ate over how our
federal system functions, as well as the battle for con
trol between the states and the federal government, will
continue. The Supreme Court, which has played umpire
in this battle, will also likely contin ue to issue rulings
that influence the balance of power.

AMERICAAT OElOS

Federalism

The topic of federalism raises one of the most enduring dis

of legalizing or banning same-sex marriages-or leave

putes in American history-the relative power of the national

such matters strictly to the states?

government versus the governments of the states. As you

Should the commerce clause be interpreted broadly,

read in the last two chapters, Americans have been at odds

granting the federal government much power to

over the strength of the central government since well before

regulate the economy-or should it be interpreted

the American Revolution . The issue of centralization versus

as narrowly as possible to keep the government from

decentralization has taken a number of specific forms:

interfering with the rights of business owners?

Is it right for the national government to use its finan

Should the federal government have a role in setting

cial strength to pressure states into taking actions such

national policies for public education-or should that

as raising the drinking age by threatening to withhold

be left entirely to the states?

subsidies-or are such pressures an abuse of the fed

Should the federal government establish a national

eral system?

system for funding health care-or should that, too,

Should the national government intervene in the issue

be left to the states or to the private sector?

Take Action
any people believe that it's only possible to have a real
impact on the problems We face-the economy, poverty,
health care, or the environment-at the national level. You can
do a lot to address these issues at the state and local level, how
ever. Consider thatan individual or a small group can have much
more Influence on a state government than on the national one,
and can make an even bigger impact on a local governm ent.
As the slogan goes, "Think globaJly, act locally:' Your local
government controls construction and land-use issues, oversees
the police or sheriff's department, and can pass all kinds of local
ordinances. Will banning the sale of Styrofoam cups lead to a
tidier environment- or is it a ridiGulous infringement on per
sonal freedoms-?There are hundreds of such issues that you and
your friends could take up.
Acting locally does not have to mean political engagement,
however. You can also volunteer your services to a cause that

68

PART 1: THE FOUNDATION S OF OUR AMERICAN SYSTEM

concerns you, such as improving the environment or help

ing the poor or the elderly. Volunteer activities can be very
gratifying. and you cOl,lld make a big difference in the liVes
that you touch. Try using VolunteerMatch to find volunteer
opportunities in your community. Just enter your ZIP code on
its Web site (www.vo'unteermatch,org). Other organi
zations that work to meet critical needs include AmeriCorps
(www.americorps.gov) and the COfporatlon for National
and Community Service (www.nationaJservice.gov).

Think Globally

Act Locally

PO LITICS ONTHE

Yo u can acc es s the Federalis f Papers, as well as '>la te

const itu tions, information on the rol e of th e co urt s in
re so lving issues re lating to federa lism, and informa
{ion on international federations, at the follo wing
site: www.constitution.org/cs_feder.ht m
You ca n find informat ion on sta te governme nts, state
laws and pendin g legislat ion, and state issu es and
in itiatives at www.statescape.com
Supreme Court opin ions, in cluding those discussed
in thi s cha pter, can be found at the Court 's offi cial
Web site. Go to www.supremecourt.gov
A good sou rce of information on s ate govern
ments and issues concern ing federalism is the We b
site of the Counci l of State Governments. Go to

www.csg.org
The Brookings Instit ut ion, he nation's oldest thi nk
ta nk, is a good so urce for in forma tion on em ergin g

.~

CourseM ate

po licy challe nges, inclu di ng federal -state issues, and

for practical reco mmendation s for dealing with those
challenges. To access the inst itution's home pag e, go
to www.brooki ngs.edu
If you are interested in a libertarian perspective on
issues such as fed era lis m, yo u can visit the Cato
Institute's Web site at www.cato.org
The Web site of the Na tional Govern ors Assoc iat ion
offers informat ion on many issu es affecting th e
nation, rangin g from health-care reform, to educa
tion, to new and innova ti ve state programs. You can
access information on thes e issues, as well as man y
key issues relating to federalism, at www.nga.org
Governing ma aZin e, an excellent so urce of
sta te and local news, can be found on lin e at

www.governrng.com

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