This was originally written for my AP US Government class.

The centralized federalism towards which the nation was leaning during the Great Society is the best approach for the future of our country. The conceptions of federalism that give more power to the states were born during an era when the states were seen as nearly independent countries. This view of the United States changed after the Civil War, when the correct grammar changed from “the United States are” to “the United States is.” The concepts of federalism come mainly from the compromises needed in the Constitution to convince the states to give up the greater powers they had at that time.

One of the problems of federalism in a modern era, where people can move easily from state to state, is that the states compete with each other in an unproductive manner. They try to offer the fewest benefits to their citizens to avoid attracting citizens from other states who would receive those benefits. This is happening under the new welfare law, the Temporary Assistance to Needy Families Act (TANF), in which states receive block grants to provide welfare benefits with considerable freedom as to who receives the money and how much. States also compete inefficiently by trying to attract companies by offering special tax relief to companies that hire large numbers of workers in their state. This also promotes inefficiency, because the most efficient decision for the economy as a whole would be made without interference from varying taxation. A recent example is a southern state (Alabama or Tennessee?) offering considerable tax breaks to a car manufacturer who would locate a plant in that state. If the states did not try to compete with each other in this manner, industry and population would be distributed in a more economically efficient manner.

Another huge problem with federalism is the wasteful duplication of government administration. Conservatives always crying out for the reduction in the size of government, yet the replication of the same administration in fifty states is certainly not a good example of efficiency. The new welfare law (TANF) forces each of the fifty states to administer a program that was once largely administered by the federal government. They must also make decisions on policies, down to the smallest details. This requires considerable expenditure that would not be needed if the program were run by the federal government. Many other programs currently run by the states or by local governments would have their costs significantly reduced if many of their policies were coordinated the federal level rather than run as independent units that have to make each decision on their own.

Another problem with the federal system is that the use of states as taxing and spending units hampers the redistribution of income and often sends money to the wrong places. The idea of general revenue sharing that was used during the 1970s and 1980s should be significantly extended to find all programs in which states do roughly the same thing. (The more sensible thing to do with these programs would be to fund and run them from the federal level.) State and local taxes could be eliminated almost entirely, which would simplify people's lives (they could be a more simple type of tax if they were very small) and would allow for the more progressive federal tax system to have its full effect. Block grants like those in TANF often cause a slightly unequal distribution of money because they are based on the number of recipients of aid in an earlier time period. They also, as I said above, lead to differing benefits between different states. This is yet another one of the many problems resulting from the use of states as budgetary units.

A strong federal government is also needed to regulate matters where some states harm other states or countries, especially other much larger areas. Many northeastern states support stronger federal environmental regulations because pollution from the Midwestern states is carried downwind towards the northeastern states. These regulations must be imposed at the federal level because otherwise the Midwestern states would not impose them. Such regulations are important for people's health in significant parts of the country and also for the global environment as a whole. There is no advocate in the federal system at all for the rest of the world, which is harmed considerably by the pollution from the United States. However, it is much better for the federal government to impose environmental regulations, because a smaller region is less likely to impose such regulations on itself when the costs are local and the benefits are global.

For similar reasons, the federal government is much better than the states at redistributing income, both because there is considerable inequality between the states, and because politicians are more likely to restrain from such spending when the costs are borne locally (because the benefits are also local, this effect may not be so large in this case). It is clear that trends in income inequality tends to follow trends in the level of federal control of government. In the 1930s and 1960s, when the federal government was gaining considerable power, considerable reductions in income inequality followed. However, in the 1980s and 1990s, as the federal government is giving up power to the states, there has been an increase in income inequality. In order to achieve income redistribution of a level that maximizes total utility (or even comes close), it is necessary to have strong federal control of the budget.

There are some situations in this type of federalism should be left partially to the states, because local conditions vary greatly. Education, although it should be funded by the federal government, should be controlled largely (although not completely) at the local level, where people understand the environment in which they must educate. Similarly, in the development of public transportation, the federal government should provide large amounts of funding but leave some of the decision-making as to what type of transportation will be built to the states or to lower levels of government.

One of the original arguments for the federal system can now be used to argue against a form of the federal a system biased towards the states. Madison, in the The Federalist, argued that the federal system helps prevent factions from gaining too much control and causing tyranny of the majority. States are much more likely to be taken over by these factions, since they are much smaller and more homogeneous. This control by special interests occurs frequently and must often be broken up by the federal government. The best-known example is the racist policy of Southern states for the century following the Civil War. A more recent example is the dominance of the pork industry in preventing environmental regulation in North Carolina. It is much easier for special interests to dominate in state politics than it is in federal politics, because many special-interests are related to industries that cover small parts of the country.

Not only can a strong federal government can accomplish the tasks of government much better than the states can, but also the arguments that were once good reasons for state power no longer bear as much weight. The main one was the preservation of rights as outlined in Madison's argument for the separation of powers (The Federalist, No. 51). This is no longer true for two reasons. The first, as I already said, is that state governments tend to be more likely to hurt minorities or listen to special interests. The second is that, after two hundred years, the government has become considerably more stable and the people more accustomed to liberty that we need less protection to preserve our democratic form of government, and we can eliminate the protection, such as state power, that is the most costly.

- 1998 February 9.

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