Federalism and Polarization

The advantages and disadvantages of federalism have generated ongoing debate in many of the 28 countries currently operating federal systems and also in polities such as the U.K. that have considered adopting a federal system. In The Divided States of America: Why Federalism Doesn’t Work, Donald F. Kettl weighs in on this debate and argues that federalism may have once been a necessary and even valuable feature of U.S. politics, but it “has become not so much the glue that keeps the country together but an engine driving it apart.”

Kettl is the Sid Richardson Professor at the LBJ School of Public Affairs at the University of Texas and author of several books analyzing American politics. He was also a long-time columnist analyzing federalism issues for Governing magazine. He is concerned about various aspects of American federalism as it has operated since the 1970s, but his chief concern is that state governments are making an increasing number of decisions about issues like health care, environmental protection, and education, which have led to widening differences in policy outcomes across the 50 states.

State Policy Choices

States have always had considerable freedom to make their own policy on a wide range of issues. When crafting policies to reduce air and water pollution, for instance, Congress has generally followed a cooperative federalism model—setting national standards and letting states figure out how to meet them. Congress has even made special allowance for California to apply for waivers from federal rules and require auto makers to meet higher fuel-economy standards than in other states. Meanwhile, a number of states have responded to Congress’ failure in recent years to enact climate-change legislation by passing laws intended to achieve, to some degree on the state level, what has proved unattainable in Washington, D.C. This has resulted in “significant differences between the states in environmental performance,” as “some states have raced either to the top. . . or toward the bottom.”

State discretion and policy variation are also prominent in health policy, especially in the Medicaid program that provides health coverage for low-income persons. In contrast with Medicare, a purely federal program targeted to senior citizens, Medicaid is a joint federal-state program with decision making and costs shared by federal and state governments. In fact, states are not even required to participate in the Medicaid program. Arizona did not sign on until 1982, 17 years after the program began. States choosing to participate must cover certain persons and services, but they retain significant discretion to determine eligibility beyond minimum federal requirements. In high-income states, the costs of Medicaid are split evenly between the federal government and the states. In low-income states, the federal government picks up much more of the bill, up to three-fourths of the costs in certain states.

Even after the passage of the Affordable Care Act (ACA), states retain significant policy and administrative discretion over various aspects of health policy. The ACA requires an insurance exchange (marketplace) to be established in each state where individuals can shop for insurance and, depending on their income, qualify for federal subsidies. But states have a choice of running these exchanges themselves, letting the federal government operate them, or sharing responsibility for them. Even more important, the ACA sought to bring about more uniformity in Medicaid coverage by requiring states to cover all non-elderly persons making up to 138 percent of the federal poverty level, with the federal government now picking up 90 percent of the added costs.

The Supreme Court, however, held that Congress could not penalize states for declining to expand Medicaid by withholding the entirety of their federal Medicaid funds. This ensured that states have a meaningful choice about signing on to Medicaid expansion. Over time, three-fourths of the states have signed on, but many states, including Texas, Florida, and North Carolina, have declined. Meanwhile, the Trump administration has followed prior administrations in issuing waivers permitting states to deviate, in occasionally significant ways, from federal Medicaid policy, such as by imposing work requirements or monthly premium payments.

State policy variation may be moderating the effects of America’s increasingly polarized politics and reducing the intensity of national conflict on contentious issues.

Of course, states have long exercised significant policy autonomy, especially on “tough and divisive issues” where common ground “has often proved elusive.” State experimentation and variation were particularly prominent in the Progressive Era, when state policies ranged widely on whether and how to regulate the hours, wages, and conditions of workers. This continues today, when states can set a minimum hourly wage higher than the federal rate of $7.25 and many states do so. States have also long made divergent decisions about what taxes to levy and how much revenue to raise. These are just some of the policy areas, along with regulation of firearms, abortion, and marijuana, to take some current examples, where states exercise significant discretion. As has long been the case in the U.S. federal system, states sometimes move in the same direction and toward a common goal, albeit at varying speeds, as with removal of criminal penalties for marijuana use; at other times they move in opposite directions, with some states easing and other states restricting access to firearms or abortion, for instance.

Kettl contends that the contemporary period differs from prior eras in that a “remarkably wide range of policy outcomes. . . [has] crept into the American system” in a way that contributes to widening inequality. As he writes, “the quality of services that citizens receive varies widely; the variation depends on where they live; and some states tend to rank high in quality of services, while others tend to rank low. Federalism matters, and as a citizen, what you get depends on where you live.” In his most provocative claim, Kettl argues that differences in state policy outcomes are “fueling political polarization in an already divided nation.” Referring to the federal system as Madison’s invention, he argues: “There’s profound irony here: the great invention that made it possible for the states to become united has ultimately become a sharp instrument for driving them apart.”

Kettl’s Solution

What is needed, according to Kettl, is a Hamiltonian strategy to “deal with the costs of Madison’s great invention.” But the three dimensions of Kettl’s “Hamiltonian solution” prescribed in the concluding chapter turn out to be rather modest and underdeveloped in key respects and not always clearly targeted to combatting the ailments diagnosed in the preceding chapters. His first proposal is to “transform the role of federal grants by focusing intergovernmental aid primarily on inequality-busting initiatives.” He acknowledges that federal aid is already focused to a significant degree “on redistributive programs.” But he would go even further in this direction and would ideally like the federal government to “retake the reins of Medicaid in particular.”

Two other proposals are not as clearly developed. One proposal focuses on how federal officials can benefit from state experimentation, but it is not readily apparent what exactly this would entail and how it would differ from current practice. He says that state policy experimentation should continue, but there should be “less commitment to using the lessons that individual states learn to redefine national policy” and “a more explicit strategy of learning from state experiments” in a way that “could provide a more effective strategy for national progress.” Still another proposal, which seems to be at cross purposes with his preference for “a far stronger federal role,” would give “the nation’s local governments a more prominent place in our federal system—a place in the debate over intergovernmental power that they have never enjoyed.”

These briefly developed concluding proposals are likely to attract less attention than Kettl’s overall argument that a stronger federal government would reduce inequality and, of particular importance, would be “the best way to bring the divided states of America together.” His contention that federalism is fueling political polarization and that a stronger federal government role would reduce polarization is the book’s most interesting claim. It is also open to considerable scrutiny. The key question is how to understand the relationship between divergent state policies and political polarization.

Is Federalism Making Polarization Worse or Moderating its Effects?

Although Kettl stresses the ways that widening state policy outcomes may be contributing to polarization, one could also understand this relationship in other ways. For instance, these developments could be largely unrelated. States may be pursuing increasingly diverging policies at the same time that Americans are becoming more politically polarized, but without one necessarily causing the other. At the least, a case could be entertained that these developments are mostly proceeding on separate tracks.

Still another way of mapping the relationship between federalism and political polarization is to consider diverging state policy choices to be less a cause and more a product of intensifying polarization. Rather than contributing to polarization in an unhealthy way, state policy and administrative discretion might be seen as an accommodation to the inability of Americans to reach agreement on national solutions to divisive policy issues. Why is policy-making on contentious issues increasingly undertaken by states? Because party divisions at the national level are growing increasingly sharp at a time when the parties are at relatively even strength nationally. Even when one party or the other gains a temporary advantage, this falls short of the supermajority needed in the Senate to enact major legislation. As a result, policies on climate change, firearms, immigration, and marijuana have rarely come from Congress in recent years (though they may and increasingly do come via presidential and administrative action). Moreover, on the rare occasions when Congress does enact policy on important topics such as health care, it turns out to be necessary, in order to get the legislation passed, to allow states to maintain significant discretion over implementing these policies.

Policy on contentious topics is more likely these days to emanate from the states, where differences in the political cultures and policy preferences of residents of the 50 states often lead to one party enjoying a clearly dominant status. In most states, one party controls the governorship and legislature and often enjoys a significant advantage in legislative seats. As a result, Democratic-controlled and Republican-controlled states are diverging not only in their approaches to tax policy, as has long been the case, but also in the policies they enact in a wide range of other areas and in the approaches they take when implementing federal programs.

One might hold out the possibility of governing officials in Washington, D.C. crossing the aisle and forging common ground on these and other contentious policy issues. Alternatively, one might envision a situation where one party gains such an overwhelming and durable advantage nationally that it can disregard the minority party and enact nation-wide policy solutions on contentious issues. Neither outcome appears likely in the foreseeable future. As a result, and in the absence of a bipartisan national consensus on key issues of public concern, states are likely to continue taking the lead in enacting policies that are aligned with the diverse preferences of their state residents, not merely as a precursor to national policy solutions but as a reflection of enduring differences in state political cultures and policy preferences. On this account, the diversity of state policy outcomes might be viewed not as a regrettable development, but rather as a virtue of the federal system. In fact, state policy variation may be helping to moderate the effects of America’s increasingly polarized politics and reduce the intensity of conflict on contentious policies.

There is more work to be done in investigating the relationship between federalism and political polarization and placing Kettl’s view of this relationship in dialogue with alternative understandings. The Divided States of America is a deeply informed, highly accessible, and provocative engagement with these questions, written by a scholar who has devoted decades to analyzing the U.S. federal system. Unfortunately, as Kettl notes, at a time when so much is riding on answers to these questions and scholars and practitioners would particularly benefit from ongoing engagement with them, “academic attention to federalism [has] diminished.” Although “leading departments of political science and schools of public affairs once regularly offered courses in federalism,” now “those courses have become hard to find.” Whether or not one agrees with Kettl’s diagnoses and prescriptions, he is on solid ground in noting that federalism has “become ever more important” and can even be considered “the keystone of governance in America.” It merits renewed attention.