Federalism, Yet Again: Views From the Citadel

Last Fall, the excellent Jim Fleming (Boston University Law School) organized a fun conference on “America’s Political Dysfunction: Constitutional Connections, Causes, and Cures.”

Part of the conference was a panel inviting Sotirios A. Barber (Notre Dame) and yours truly to critique each other’s books on federalism—respectively, The Fallacies of States’ Rights (Harvard UP, 2013) and The Upside-Down Constitution (Harvard UP, 2012). Both of us took the assignment quite seriously.

Let’s just say there’s not a lot of common ground; it’s a rather pointed exchange. To my mind, though, the colloquy illustrates the high utility (as well as the entertainment value) of the bilateral critique format, which I think Jim Fleming invented. Kudos.

What struck me on flipping through the essays for purposes of this post is just how much of a game changer the ACA has been, or become. States, functioning (as Madison envisioned) as platforms for political resistance to centralizing schemes: that should not happen in either author’s world—in the normative sense of “should” in Sotirios Barber’s world; in the predictive sense of “should” in a pure public choice world. Maybe it goes to show that good things happen unexpectedly when someone in Washington does something really stupid.

Prominent mention must be made of our fellow-panelist Larry Yackle and his probing questions about The Upside-Down Constitution. They’re hard questions but eminently fair, and very important. I blow by most of them here because this is a blog, not a seminar. To give a flavor, though, here are Larry’s concluding sentences:

[F]or Greve, the outsized power of small-population western and southern states in the Senate should be an invitation to demand abusive rents — the very thing competitive federalism was meant to forestall. I do wonder, accordingly, whether Professor Greve would form common cause with commentators who fault current arrangements for the states’ participation in the national government.

The analysis is precisely right. The standard prediction for every cartel, economic or political, is that the small will exploit the big. And every piece of evidence that I’m aware of supports the blackboard prediction with respect to federalism—ours, and other countries’. It’s one of the reasons why those ornery small states are net beneficiaries of, and cheerfully participate in, our national pastime of blanketing the sky with transfer dollars.

Do I therefore “form common cause with commentators who fault current arrangements for the states’ participation in the national government,” which I take to mean the Senate? Up to a point: I’m a firm bicameralist but hold no more brief for the Senate’s composition or its role as a citadel of federalism than did, say, James Madison or Alexander Hamilton. But that’s neither here nor there: under the Constitution states are the places where Senators and Representatives come from. That’s not going to change. What you can change, maybe, is the political economy.

Every rent that gets dissipated must first be produced, and every rent that gets paid requires an idiot who is willing to pay it and some institutional mechanism that makes him do it. The underlying federalism exchange is this: New York, California, etc could not conceivably sustain the redistributionist schemes they favor without selling their voters on the illusion that hey, much of the money comes from Washington (and we can’t give that up). That, though, requires bribing more conservative states into the scheme. Hence, states that are liberal across the board cheerfully afford those loathsome prairie states the privilege of being American, except more so: philosophically conservative, operationally liberal.

To end the bargain, either the payor or the payee has to say “no.” Contrary to economic reason (and for that matter federalism theories that import “social learning”), the federalism payor will never say “no.” New York will pay any price, bear any burden for its social model, and that resolve will increase—as it has over the past century—with its success in ramping the model up to national scale. Mayor di Blasio is right. There really are two New Yorks: the billionaires who don’t care about seeing their dollars diverted to Cheyenne, and the Medicaid and food stamp population. The sentient middle class, like Elvis, has long left the building.

The astounding fact is that the payees now say, “no.” 100 cents on a dollar of Medicaid expenses, tax credits for “Exchanges”: no. They would rather compete than collect rents. That’s the thing that Congress never expected because it should not happen; but it’s the most important thing in our domestic politics.

Would my friends who lament abusive state rents join me in rejoicing?