Cooperative Federalism is the Handmaiden to the Administrative State

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What does federalism have to do with the administrative state, and vice versa? Everything. Statutes typically confer authority on a federal agency (or several) in the first instance. However, practically all federal regulatory programs are “cooperative,” meaning they’re implemented by state and local officials. Entitlement programs from Medicaid to education are likewise run through states. So states will participate in the federal agencies’ process. Federalism isn’t shaped in once-in-a-generation enumerated powers cases; it’s shaped in millions of daily administrative interactions. How does that work?

A recent, highly instructive contribution to the small literature in this field is Miriam Seifter, “States as Interest Groups in the Administrative Process.” While written for experts and so not for the faint of heart, it’s a big step in the right direction. In contrast to the dominant view of state groups as authentic representatives of “the states,” Professor Seifter treats them as interest groups. Having made that sensible move, she argues that

the groups generally (1) are more consistent advocates than states individually of the institutional values commonly sought by federalism proponents; (2) fail to facilitate, and may even stymie, the transfer of information to federal agencies about individual state views; and (3) are less transparent and accountable to state citizens than individual state officials, and may compromise the accountability of the federal administrative process in which they participate…. State interest groups’ practice of advancing a single “state” position, and their lack of transparency in doing so, facilitate advocacy of the state institutional concerns that matter most to many federalism proponents. But that same practice of presenting a single position squelches the diversity of state experiences that could strengthen the epistemic foundations of agency decision-making. Moreover, absent transparency, there is a risk that the aggregate view is not shared by state members’ citizens or even by the state member themselves.

That sounds right to me. There’s no reason to think that any trade or interest group will faithfully represent its members’ views in Washington; the information gaps are just too big. And that goes double when the agency chain runs from principals (citizens) to elected state officials to appointed officials to some multi-state association. But I think it’s probably worse: the positions of the groups will be systematically biased, and not in good ways. Three quick hypotheses:

  • Groups representing states as states—that is, as institutions—will rarely if ever support policies that would allow states to compete. Professor Seifter discusses the National Association of Insurance Commissioners (one of the oldest and most influential state lobbies). It would be great if insurance policies (from auto to flood to health) could be sold across state lines. But no insurance commissioner, let alone the NAIC, will take that position. That’s because they run the state fiefdoms. They’d be idiots to expose themselves to competition, and that’s generally true of all state regulators.
  • The usual question is whether these groups are any good at protecting federalism’s “balance” and how to arrange the administrative process to that end. To her credit, Professor Seifter goes beyond that hidebound inquiry. I think it’s the wrong question. Here’s why: the state officials have to create unanimity, and they have to get along with the feds. How does that work? Answer: work out some arrangement that makes everyone better off. What’s that? Answer, some policy that maximizes the amount of money that sloshes through the system and the discretion and power that goes into it. (You can always fight over the spoils somewhere down the road—that’s the absurd “balance” question.) This is how Medicaid works. And education, and executive federalism across the board. Nothing here to celebrate.
  • Following other experts (Cathy Sharkey, Lynn Baker, Ernie Young), Professor Seifter suggests that broad-based state groups might be particularly useful when there’s a concern that states might inflict negative externalities on each other. I think the opposite is much more likely. Suppose state officials can tax and regulate only their own citizens: that’s a high-cost proposition. They’re all much better off if they can agree to tax and regulate each other’s citizens without getting caught in the act; and opaque multi-state associations are just the place to arrange that (so long as no one blows the whistle). The Multistate Tax Commission, for example, says in its mission statement that it’s dedicated to promoting state tax coordination and reducing double taxation. In its legal briefs (such as this one, in a pending case I’ll blog about soon), the Multistate Tax Commission consistently takes the opposite position: double taxation is not a problem but rather the glory of federalism.

Professor Seifter has a few cautious suggestions to curb dysfunctions in this murky field. She warns against mis-applied judicial deference doctrines. I’m with her but would go much further: the entire canon of state-protective doctrines in administrative law (starting with the “presumption against preemption”) needs an overhaul. She also wants more transparency. Again, I agree. But I don’t think increased voluntary disclosure—her preferred approach—will go very far. What is needed is institutionalized whistle-blowing—rival state associations, established and closely monitored by states so inclined, that systematically agitate for competition, against expanding revenues and discretion, and against mutual state exploitation. For reasons discussed in earlier posts eons ago, I think such organizations may actually have a chance in this day and age. If they come off the ground, they will have my very best wishes and full-throated support.