European-Style Federalism’s Lessons for America
An emerging system of "variable speed federalism" is allowing federal policy to adapt to the states' political and policy diversity. But at what cost?
Issues such as health care, climate change, education and abortion all have two things in common. In addition to political controversy, they all feature substantial policy differences among the states.
Diversity across states is, of course, nothing new. It has always been one of the enduring strengths of federalism. In recent years, however, widening differences in political cultures and policy priorities have emerged, leading to mounting conflicts in public policies originated among the states, from gay marriage to marijuana regulation.
While federal programs exist in part to smooth differences across the states, these yawning ideological conflicts have spilled over into federal programs as well. Far from providing a uniform floor of national services, federal programs have become a new battleground for states to demonstrate their fidelity to very different ideologies and political alliances.
The ideological winds are strong enough to cause many states to act in defiance of fiscal logic and rationality. For example, researchers at the Urban Institute have estimated that the 24 states that are not expanding Medicaid under the Affordable Care Act are foregoing $423.6 billion in federal Medicaid funds from 2013 to 2022 while saving only $31 billion in state matching funds. A similar situation arose with states refusing to extend unemployment benefits even if paid for by the federal government under the Obama administration's stimulus program.
This polarization presents new challenges for Congress, the president and bureaucrats designing federal programs. Buffeted by conflicts between the nationalization imperative and irreconcilable conflicts among states, what are national officials to do?
We believe that important insights can be gleaned from the ongoing project of European integration. Needless to say, differences across European nations are more deeply rooted than are those among our states. However, European policy-makers have had to find ways to overcome or mitigate these differences in the interests of achieving broader policy agreement and standardization across the fragmented continent.
European leaders pursue a process of "differentiated integration" to highlight the tradeoffs that must constantly be made to resolve tensions between pan-European standards and the autonomy of individual nations. The result is that differing European policy arenas run at different speeds, with different subgroups for different policy areas including customs, free trade, cross-border travel, the common market and currency. These differential arrangements are supported by "opt-outs" and "opt-ins" by individual nations, empowering them to decide whether and how they will join in broader multinational agreements.
In the United States, the differences across our states are forcing national officials to borrow a page from the European playbook and move toward a system that might be called "variable-speed federalism." Increasingly, federal officials in this country have sought to accommodate state-based political diversity with a selection of tools that permit a greater degree of variation in the implementation of federal programs and standards. Such tools include state opt-outs, expanded federal waivers, and partial or "one tail" pre-emptions, which set a minimum federal standard but allow more aggressive state action if desired.
The Obama administration has been forced to use all of these tools to gain the buy-in or acquiescence of increasingly restive and divided states for national programs. At times, this includes opt-outs that defuse sharp ideological conflicts by limiting the scope of new programs to a coalition of willing states. At other times, polarization has prompted the administration to adopt highly decentralized standards to give states unprecedented flexibility in implementing new federal programs.
An example of the latter is the Environmental Protection Agency's proposed new regulation to reduce carbon emissions from the power sector by 30 percent. It proposes state-specific goals based upon each state's unique policy context and current energy mix. West Virginia, with a power industry heavily reliant on coal, would be expected to cut its power-plant emissions by 21 percent, for example, while Washington state, with just one coal-fired plant, would be required to achieve an 85 percent reduction.
Variable-speed federalism has become an expedient way to work around deeply entrenched ideological conflicts. While a second-best solution for all sides, it nonetheless has permitted national leaders to move forward on national policies, but at the price of limiting their scope and uniformity. In a sense, variable-speed federalism in the U.S. offers more satisfying solutions to partisans on both ends of the spectrum.
However, satisfying partisans does not necessarily ensure that broader national interests are satisfied. A key question going forward is whether this form of federalism will become a stable and sustainable new equilibrium for domestic policy. Will policies that arise in a deeply polarized system be strong enough to satisfy the economic and social policy interests for a great nation for which so much is expected?