Putting Bush to the Test

The next four years may alter the state-federal relationship for decades to come.
by | February 2001

Will George W. Bush be another in the modern line of New Federalist Republican presidents, continuing to shift power down to state and local government? Or will he turn out to be a maximizer of federal power under the cloak of devolution? It won't take long to find out.

To listen to much of Bush's campaign rhetoric, he aims to make education the cornerstone of his approach to federal-state relations. "There is no better place," he said recently, "to start to show America that our Congress and the president can cooperate for the rest of the country, than education."

If schools do turn out to be Bush's signature issue on the federalism front, he's selected one over which the federal government has very limited leverage. The White House provides a bully pulpit on education (as the Reagan administration proved) and the federal government can provide important educational incentives. The real work in education, however, is state and local. That always has been true, and it always will be true.

This dilemma will scarcely stop the Bush effort. His heart is in education: You can take Bush out of Austin but you can't take the governor out of this president. Still, the new president may want to look at several other issues on which he is better positioned to make his mark on the future of federal-state relations. Here they are: --Regional offices. Bush has used his Cabinet appointments to send the first wave of signals about his choice of policy associates. In many cases, the policies themselves will depend much more on the kind of regional administrators the new administration chooses than on the Cabinet officials at the top.

The federal government's regional offices are an often-ignored piece of the intergovernmental system. Regional offices are little more than afterthoughts in the big Washington battles, but almost 90 percent of federal employees and even more of the real work are located on the far side of the Potomac.

The regional offices are the shock absorbers in the federal system. Regional offices are where the tensions between state flexibility and federal control actually bite.

In environmental policy, for example, the toughest problem is fitting federal stovepipe environmental rules--programs arrayed according to categories such as water, air and soil pollution--to place-based approaches in the states. How will EPA's new regional administrators manage this tough problem?

The same goes for problems ranging from the Department of Labor's management of workplace standards laws to the Office of Civil Rights' interpretation of Title IX requirements for equal athletic programs for college men and women. Whom the Bush administration appoints to these critical--and often overlooked--regional jobs will affect day- to-day federalism as much as any other decision he makes. --Supreme Court appointments. The Supreme Court's 5-4 decision that gave the election to Bush was the same margin that decided a whole series of important federalism cases in the past couple of years. In the last two sessions, the same group of five justices--Rehnquist, Scalia, Thomas, Kennedy and O'Connor--has consistently carved back the federal government's power.

The Court struck down federal requirements that local law enforcement officials conduct background checks for gun licenses. It protected the states from suits by patent owners, shielded states from lawsuits by businesses claiming unfair competition, and held that state employees cannot bring suit to force state compliance with federal labor-law standards.

During the campaign, Bush carefully danced around the question of whom he would appoint to the Court. It's a safe bet, though, that his appointees will resemble those who have produced the recent round of pro-state, anti-federal rulings. That, in turn, would likely consolidate--and perhaps accelerate--the shift toward state power. There could be no greater irony for a president whose election depended ultimately on the same five justices asserting federal preeminence over the Florida election process. --Internet commerce. An informal poll of state and local government organizations shows remarkable consensus on one key issue: Internet taxation is the top-priority federal-state issue for the coming year. In 1998, Congress passed a three-year moratorium on new taxes covering electronic sales transactions. Now the law is up for review, and there will be heavy pressure to make the temporary moratorium permanent.

State tax officials are busily cobbling together their own plan to collect Internet taxes. They worry that a permanent exemption will move from a revenue leak to a revenue hemorrhage as Internet sales expand. On the other hand, Internet retailers complain they can't possibly cope with the welter of state and local sales taxes, let alone special districts such as stadium districts.

Bush will have to wade into this swamp soon, whether he wants to or not. The choices he makes in navigating it will go a long way toward shaping state tax policy in the emerging Internet economy.

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