States' Not-So-Dire Straits

This is a season of lamentation for believers in the American federal system, or at least for those who believe state governments ought to occupy a position of honor and respect within it. States and their advocates complain that they are being bullied and pushed around by every branch of government in Washington: preempted, mandated, zeroed out, lectured to and generally dissed.
March 2005
Alan Ehrenhalt
By Alan Ehrenhalt  |  Senior Editor

This is a season of lamentation for believers in the American federal system, or at least for those who believe state governments ought to occupy a position of honor and respect within it. States and their advocates complain that they are being bullied and pushed around by every branch of government in Washington: preempted, mandated, zeroed out, lectured to and generally dissed.

They have a case to make. Everywhere one looks these days, one can find significant instances of federal aggrandizement at state expense. The No Child Left Behind Act has imposed federal strictures on a 200- year-old state and local educational responsibility, leaving the states in the hole for at least $10 billion that the feds seem to have no intention of paying. Congress continues to welch on its commitment to pay for programs in special education and homeland security that it insisted on enacting. The jointly administered state-federal Medicaid program has brought state treasuries to the brink of insolvency, with no federal help even under serious consideration. Congress keeps finding new areas of economic activity in which to consider preempting state authority, from taxation of Internet access to regulation of the insurance business.

Recently, when my colleague Alan Greenblatt set out to interview state government advocates about their view of the current balance of power, he encountered an almost unremittent tale of woe. "We are on the defensive now," lamented Ray Scheppach, of the National Governors Association.

Moreover, to many believers in the righteousness of the state cause, it's not just a fleeting instance of federal-level aggression. Rather, it's one more demonstration of an unpleasant truth about the American federal system: The states never get their share of influence, or anything close to it. Their power doesn't ebb and flow; it just ebbs. Decade after decade, administration after administration, political authority leaks out of the 50 state capitals and moves into the executive, legislative and judicial corridors of Washington. The states are the increasingly more neglected partner in the American system of divided authority and separation of powers.

Some of the most highly respected federalism experts see the entire last generation as a saga of steadily eroding state influence, punctuated only by brief and inconsequential periods of lip service to devolutionary philosophy. Paul Posner, of the U.S. Government Accountability Office, is one of the most forceful advocates of this position. In his view, the American federal system has evolved into one in which Congress simply seizes control of any state issue it wishes to grab, and then refuses to let go. "What we've backed into," Posner says, "is a very oppressive form of federalism"--meaning, of course, an oppressive bullying of the states by the federal government. "Too many national politicians have too much interest in state and local issues to ever unwind this system."

It all makes for a rather poignant tale of victimization, and tales of victimization can make good reading. I have only one objection to this one. I don't think it's true. I think the states and their advocates are so preoccupied with their ill treatment at the hands of Washington that they fail to notice how much actual influence they have been exerting in the past five years.

Posner, for example, cites a dramatic increase in the number of state laws that Congress has voted to preempt in recent years, especially in the fields of health, environment, transportation and public safety. Prior to about 1970, Posner has found, there were rarely as many as 40 of these in an entire decade. Since then, the number appears to have roughly tripled. Indeed, state initiatives to regulate the economy are getting smacked down by Washington a lot more often.

But one can look at such statistics another way. It seems to me that states are being preempted these days because they are taking meaningful legislative action: passing clean air laws, enacting health care regulation, imposing guidelines on retail commerce. If this weren't a period of state activism on the economic front, the feds wouldn't be out there trying to preempt it.

But the evidence for that point is as much qualitative as it is statistical. Congress proved famously unable to pass any meaningful health care legislation during the entire decade of the 1990s; a majority of states moved into the vacuum and passed patients' rights and other substantial initiatives. Congress debated utility regulation for an entire decade and took no action on the subject; by that time, more than a dozen states had, with results that ranged from successful to disastrous. No significant federal preemption took place on either of these subjects.

On other fronts, admittedly, Congress has shown a marked tendency to pluck juicy issues from state legislative hands. Some 37 states passed laws creating "do not call" lists restricting the intrusions of telemarketers; Congress then overrode those with a federal version. On a similar track, 36 states passed some form of legislation restricting Internet spammers; Congress then stepped in with a statute that forced some states to weaken their provisions, while establishing a regulatory floor for state policy on this subject.

Yes, that was preemption of a sort, but it was hardly a showing of state-level impotence. Rather, it was a demonstration of how the federal system tends to work these days on an increasing range of issues: States start the ball rolling; Congress moves in; some of the state level initiatives are rolled back, but a good portion of the original idea is preserved.

By far the most important refutation of state impotence, however has been the activism of the attorneys general. Ten years ago, no one could have predicted the resurgence of these state officials as crucial players in the federal system. In the years since their first important victory--the multibillion-dollar legal settlement reached by more than 40 states with the major tobacco companies--attorneys general have been active on almost every conceivable legal front: suing utilities to limit carbon dioxide emissions; filing legal actions against mutual funds and insurance companies; taking pharmaceutical companies to court with accusations of illegal marketing of prescription drugs.

Legitimate questions can be raised about the propriety of some of this activism; attorneys general are essentially unaccountable players in the regulatory system, rarely required to seek approval of voters or state legislators before embarking on any particular crusade. Nevertheless, the impact of their intervention has been profound, and has rippled through diverse sectors of the economy.

These days, when industries come to Washington pleading for uniform federal regulation, they're not paying homage to the growing importance of Congress. They are expressing their desire to be free of the regulatory and litigational wild card that attorneys general-- especially acting in concert--have come to represent. New York's Eliot Spitzer, with his suits and settlements against the most important companies on Wall Street, is the symbol of the new state regulatory order, but only the symbol. Attorney general activism is an instrument of political power that has spread across the country in a remarkably short time, and it is unlikely to go away anytime soon.

One of the most interesting testaments to this new order--certainly one of the most ironic--has been the shifting stance of conservative free-market intellectuals, and especially that of Michael Greve, of the American Enterprise Institute's Federalism Project. Five years ago, when Greve wrote his influential book, "Real Federalism," he expounded the traditional conservative doctrine that the federal government was too intrusive in regulating the economy and that courts should re-direct more jurisdiction to the states. Today, he is arguing that more federal preemption is needed to save corporate America from the effects of cumbersome and conflicting state laws that threaten to hinder the nation's commerce. Greve and the free-marketeers haven't changed positions because they think states are weaklings or victims in the federal system; they have changed their minds because states have found a weapon no one ever expected them to find, and are using it in a way the free-market forces don't like.

When you add up all of these factors, it's hard not to conclude that the current round of wailing about state victimization is somehow misplaced. Of course, a lot depends on what you mean by victimization. If your point is that Washington isn't showing the state governments a great deal of respect these days, then undeniably you are right. A Congress loaded with conservative Republicans who used to preach the virtues of devolution has become perversely fond of issuing mandates to states without offering to pay for them; failing to live up to previous promises to help with jointly sponsored programs; and listening attentively to the complaints of any organized industry that thinks state officials are being unfair to it. If it's decent treatment from Washington that the states care most about, I can see why they're feeling despondent.

But if you look at things from a slightly different angle, and judge the relevance of state governments by their ability to generate creative policy solutions and force their way into vital national debates--in that case, I think you have to say the states are doing rather well for themselves these days. This may not quite be the golden age of state-level innovation that took place in the years before World War I, but it's not exactly a moment of stagnation, either.

Yes, Washington is picking on the states, reneging on its commitments to them and chipping away at their freedom to regulate the economy. And that's frustrating. But think of it this way: That isn't taking place because the states are weaklings. It's because they are troublemakers. What's happening to the states right now may be a long way from full and just partnership in the American governmental system. But it's a long way from irrelevance, too.