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What Brand of Federalism Is Next?

Obama’s mixed approach of coercion and collaboration seems to be working, but that may not last.

In Governing’s first issue almost 25 years ago, John Herbers, who had just retired as a national correspondent for The New York Times, wrote a cover story heralding the advent of a largely unplanned, unpredicted new federalism, where more responsibility and authority were being devolved down to the states and their localities as the Reagan administration reduced the federal imprint on American governance.

State and local management capacity had improved substantially, he wrote, since Washington had relied on those bureaucracies to manage federal money rather than expand its own. States and localities raised as much in new taxes as the administration had cut. And perhaps most surprising in the context of what we are experiencing today, there had been “a sharp decline in ideological or partisan divisions among state and local public officials, a result of the growing belief among Democrats and Republicans alike that certain public outlays for social and economic programs are likely to save money in the long run.”

Indeed, coming out of the recession of 1980-82, states in the subsequent four years grew their revenues by one-third, to $228 billion. And that didn’t include mushrooming cash inflows from nontax sources like lotteries, which had expanded into a majority of the states.

Because the national economy was humming along quite nicely and the tax base had significantly expanded, state and local governments experienced what would be an almost three-decade run of solid increases in tax revenue -- interrupted slightly by two mild recessions.

The political side of it didn’t go quite as Herbers had imagined. Many states took a leadership role on national policy matters from the time Governing launched through the end of the Clinton presidency in January 2001. The most prominent trophy on their mantel probably was the national welfare reform law in 1996 that grew out of programs started by Republican governors in Michigan and Wisconsin. Relations with the feds during that period were sometimes a bit rocky, but there was little doubt that Washington and the country were headed in the same general direction.

The surprise came later, with the election of the George W. Bush administration, which showed no interest in following the traditional conservative, states-rights script. What followed was the No Child Left Behind education law, the Real ID Act, a wave of pre-emptions of state regulations and thinly disguised mandates (which supposedly had been banned). Meanwhile, the White House Office of Intergovernmental Affairs was a sham -- a purely political operation manned by junior staffers whose sole interest was promoting the administration’s policies rather than working with state or local officials. Washington lobbyists pushed for more centralization, with the idea that their industries could cut a better deal at the federal level and avoid a patchwork of statutes and regulations. It was what Don Borut, executive director of the National League of Cities, called “coercive federalism,” or when he was being more blunt, “shift-and-shaft federalism.”

Plenty has changed since the Bush years, of course. The Great Recession has weakened the revenue base of most states and localities, and a rising tide of partisanship and ideological rigidity has swamped both Washington and many of the states. The mixture has been toxic.

In this atmosphere, the Obama administration has pursued a very unique mixture of collaborative and coercive strategies in dealing with states and localities, making it hard to define just what kind of federalism we’re seeing. The health-care, education and financial regulation reform bills, the climate change proposal and the massive financial stimulus bill all represented an aggressive use of federal power, some of it unprecedented and some pre-empting state regulations.

But there was a difference: Collaboration and sensitivity to state prerogatives was built into the mix. In an analysis in the publication Publius by political scientists Paul Posner and Tim Conlan of George Mason University, the authors noted that “the most significant feature of Obama’s approach to intergovernmental relations thus far may be his hybrid model of federal policy innovation and leadership, which mixes money, mandates and flexibility in new and distinctive ways.” Under this “nuanced federalism,” plenty of carrots are mixed in with the sticks. Even with the health-care reform plan, they noted, progressive states were allowed to exceed minimum federal standards and conservative ones could avoid participating in almost any facet of the system, using the feds as a backstop.

By most accounts, both from the federal officials who ran it and the state and local officials they worked with, the massive Recovery Act stimulus effort was an extraordinarily successful collaboration between all three levels of government. States enjoyed unusual flexibility in how they spent much of the billions in funding the act provided, and Washington was able to rely on a state and local infrastructure to get the cash out the door fast.

So what brand of federalism will we see next? Will it be the kind John Herbers foresaw as Governing was launched? Or will a mixture of this crippling recession, massive cutbacks in discretionary federal spending, and continued political dysfunction at the national and state levels render the system paralyzed?

I’m hoping for the former, but can’t say that I’m too optimistic.

Caroline Cournoyer is GOVERNING's senior web editor.
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