Federalism’s Hope

This post (lengthy, but with lots of pictures) strikes an uncharacteristically cheerful note: there is a chance to revive a sensible, efficient, competitive federalism. That hope does not rest on the libertarian pipedream of a Supreme Court that at long last restores our “lost Constitution” and overrules the New Deal. Nor does it rest on a hankering for a November victory for a GOP that promises to “devolve” power to the states. (The stupid party has no coherent federalism program; and in any event, for federalism purposes, federal election outcomes are epiphenomenal.) Rather, competitive federalism’s hope rests on one of the most resilient forces in American politics: sectionalism.

By “sectionalism,” I mean a division among states that is too deep and profound to be overcome by congressional compromise and techniques to produce state consensus at an administrative level (such as fiscal transfers, bureaucratic discretion, and intergovernmental networks). Sectionalism is essential: it is  only if and when the central government cannot generate a consensus or compromise among the states that  the federal system adheres or reverts to the constitutional baseline: competition among the states.

“Hope” does not mean “certainty.” Sectionalism, to be effective, must be organized and translated into a viable political strategy and program. It is far too soon to tell when or even whether such a strategy and program will materialize. It’s not too soon, however, to think about the possibility. The potential rewards are too great to be left on the table. Today’s post covers the empirics; tomorrow’s, some casual analytics.

Federalism’s Foundations

Why is sectionalism a necessary condition of competitive federalism? Here’s the basic theory, explored in The Upside-Down Constitution and stripped from a few pages in Geoffrey Brennan’s and James M. Buchanan’s The Power to Tax: federalism competition among states erodes state officials’ “surplus,” meaning the taxes or equivalent revenues that they get to distribute over and above the locally demanded level of public goods. (State attempt to collect such surplus will prompt productive firms and citizens to exit the jurisdiction, and there goes the surplus.) Therefore, states—meaning their political officials or elites—will act like producers in private markets and seek to organize surplus-protective cartels. To that end, states will seek to mobilize the central government. The purest form of federalism-as-state-cartel is a federal monopoly over taxation, coupled with a guaranteed revenue kickback to the states. The U.S. Constitution effectively blocks that solution, but it leaves the door open to close substitutes: federal conditional grants programs and transfer payments (e.g. Medicaid), federal minimum regulatory standards, etc.

Note that these aren’t centralizing solutions: the entire point is to generate state-level surplus that would otherwise fail to materialize. The feds will charge a price for the service, but they have to leave state political elites better-off than they would be in a competitive setting. (Otherwise, there’d be no bargain and the intergovernmental conspiracy would fail.) Thus, the cartel outcome is still a federalism solution: states get to spend federal funds, regulate on top of (but of course not below) federal minimum standards, etc. The basic fault line is not between centralization and localism but between two kinds of federalism: competition or cartel.

What can block the cartel outcome? Either a jurisdiction that would exit rather than be bought off (the antebellum South, Canada’s Quebec) or else, a sectional division that is sufficiently deep and wide to block federal cartels. The division has to be deep and nearly existential: if it weren’t, you could bribe fence-sitting states into a minimum cartelizing coalition. And it has to be sufficiently wide—not 50:50, but encompassing enough dissident states to block the majority states’ cartel initiatives. The magic number (American history suggests) is around seventeen—enough to block constitutional amendment proposals and to bottle up Congress.

Everyone knows what the federalism-protective sectional issue has been for most of our history: slavery and, after its demise, the protection of the racial caste system in the South. Those defining issues have mercifully disappeared from American politics. However, sectional divisions have re-formed around overlapping economic and cultural issues. Therein lies competitive federalism’s hope.


My research assistant, the excellent Elizabeth DeMeo, has produced several maps showing the alignments of states in three controversial policy arenas: ObamaCare, environmental (clean air) policy, and labor issues. The maps are based not on congressional vote tallies but on the preferences of state officials, as reflected in states’ litigation positions (ObamaCare, environment) and their “domestic” policies (labor). All three issues are highly salient on the competition-cartel dimension. A pro-cartel state will want a big Medicaid program, expansive federal environmental programs, and federal policies to protect local pro-labor policies. Competitive states will want the opposite.
Map 1 shows the alignment of states in the pending litigation over the Patient Protection Act. Plaintiff states appear in red; amicus states in defense of the PPACA in blue.

Map 2 shows the alignment of states in three momentous clean air cases: Massachusetts v. EPA (2007) (greenhouse gases are “pollutants” for purposes of the Clean Air Act); American Electric Power v. Connecticut (2011 ) (no “public nuisance” cause of action for states over airborne pollutants); and Coalition for Responsible Regulation, et al. v. EPA (Link no longer available) (D.C. Cir., pending), the consolidated cases over the EPA’s post-Mass v. EPA greenhouse gas regulations (see here for discussion). States supporting the environmentalist position in one or more of the cases are shown in shades of blue; states opposing, in shades of red.

Map 3 is adapted from the Competitive Enterprise Institute’s splendid workplacechoice.org project. CEI’s classification is based on 23 indicators, including “right to work” laws but also, and primarily, policies having to do with public sector unions, such as government union density. Strongly or moderately pro-labor states appear in shades of blue; strongly or moderately “pro-taxpayer” states in shades of red


Got it? It’s essentially the same map every time. Map 4 shows states that are pro-cartel/pro-competition on all three issues:

One more thing: state revealed preferences on economic issues overlap with state preferences on social issues. Map 5 (adapted from The Upside-Down Constitution) shows states with conservative positions on three or four social questions (the Equal Rights Amendment, the death penalty, gay rights, and abortion):

Different issues, same map. Striking—no?

Two final empirical notes, by way of comments on the Table below.

First, the red states (Map 4) are the most competitive, dynamic, best-performing states in the nation. They include seven of the top ten states in  ALEC’s highly regarded Economic Outlook Rankings. (4th ed. 2011). (The rankings aim to predict future economic performance, based on fifteen policy variables that correlate highly with past performance.)  Conversely, blue states tend to be the least competitive. They include six of the worst ten performers, including the big three basket cases (California, New York, Illinois).

Second, red states tend to be net beneficiaries in the intergovernmental fiscal transfer game. Four of them (North Dakota, Alabama, South Dakota, and Virginia, on account of massive military and contracting expenditures) are among the Tax Foundation’s top ten net recipients; only two (Texas and Florida) are small net payers. Conversely, the blue group consists almost exclusively of net payers, including six of the top ten (Massachusetts, New York, California, Connecticut, Illinois, and Delaware).

More To Come

By any measure, what we have here is a highly consistent, stark picture of two roughly equal, cohesive groups of states—a competitive coalition, and a cartel cabal. Next post, some analytics and suggestions as to what this might mean for American federalism.

Reader Discussion

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.

on April 04, 2012 at 03:57:30 am

I can arrange boulders to make a comfortable chair, with the components weighing up to 150 lbs. each. Most people will not fathom its obvious comfort. No amount of convincing will get another to sit in my chair. But, it's the most comfortable seat by way of its inherent support. In the right areas of contact, the body's weight is placed so as to distribute and support to great effect.

However, its portability is rather much, wouldn't you say?

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Eric Hodgdon
on May 01, 2012 at 14:56:12 pm

Whelan, I think, is correct on the potcliis that the courts are a winning issue for conservatives, but I think the appointments of Sotomayor and Kagan have softened the issue quite a bit. Neither has yet to issue a bombshell of an opinion and with Justice Kennedy in the key swing seat , he more often than not will write the most controversial judicial opinions. What is winning about the issue is that the courts DO help galvanize a large part of the base, especially the libertarian side who rightly perceive the importance of the courts. It certainly helps to rally the states and knowing the deep bench that years and years of work with the Federalist Society and like organizations has provided the right means that if the GOP gets in, good judges get selected. Without a doubt one of the older judges will retire in the next presidential term and it will be a liberal judge most likely. So it is a key, key issue that I think, right now, is a bit of a sleeper.

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on May 03, 2012 at 23:54:37 pm

MD, the "heart of the failure" (of pelope to realize that the national government is a creation of the states) is that when the Left gets to define the terms, we usually lose without really getting to put up a fight. The average registered voter has no idea what "federal" means, and has been told time and again that "'states' rights' is a code word for 'racism'" (perhaps the ultimate straw man: the theory of government expressed in the DoI does not recognize that any governmental entity has "rights"; pelope have rights, and the "just powers" of government defend those rights; "racism" itself has simply become "disagreeing with a leftist").Consequently, the average legislator doesn't have to worry about any negative consequences of letting a resolution like this wither away. If pelope understand what's being done, it's much more difficult to "pull a Pelosi".

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on June 09, 2012 at 13:36:30 pm

To each of your points: 1. No we don t. We vote as idiivnduals for U.S. Senators and Congressmen, as well as for governors, state legislators, sheriffs, etc. For each office, the candidate with the most votes wins. Except for the office of President of the United States 2. Under the status quo, fraud is cost-effective, because stealing a few hundred or a few thousand votes can tip 100 per cent of the electoral votes of a battleground state. The bigger the vote pool, the less advantage there is in committing fraud. NPV would make fraud essentially futile, not encourage it. 3. See above like fraud, counting errors have less potential effect in a national vote pool. Second 3 (you forgot to change the numbering, Eugene). On the contrary, the status quo does not require a national coalition, it simply requires getting pluralities in a dozen or so battleground states. NPV requires a national plurality. which cannot be achieved without building a national coalition. 4. The House-of-Rep process is not a fail-safe, it s just a fail. There s nothing safe about allowing a regional candidate with little national support to throw the election into the House.

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on June 09, 2012 at 13:44:16 pm

Hans, your article makes some balseess assertions. For example: "[NPV] would diminish the influence of smaller states and rural areas". What data supports this? We should live in a nation of one person, one vote, with all counting equally. But if you are a republican voting in Connecticut, or you are a democrat voting in Alabama, your vote counts for zero, as you always will be a minority voter with no ability to influence the electoral college outcome of your own state. Right now, it seems that the only people that actually determine the outcomes of our presidential elections all live in swing states like Ohio or Florida. Why should their votes count more than everyone else's. The NPV is a brilliant, BIPARTISAN, solution hardly the "scheme" that you describe, that "would give the voters of as few as 11 states control over the outcome of presidential elections". That's what we have now with the electoral college process. You want to debate this? Bring it on!

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on June 09, 2012 at 13:46:32 pm

See my reply above on "equality" of the vote. Also, we don't live in a system lieitmd to only two parties. Our system is and should be open to as many parties, or no parties as is the desire of the candidates themselves. To the extent it effectively functions as a bi-partisan system, that is only because those two parties have passed unbalanced and protectionist laws in each state to block other parties from gaining traction. NPV will not solve that problem. NPV will also not solve the swing state problem, but will rather transform it into swing precinct problems. Fraud will be rampant. Recounts nearly routine. It will get fugly fast.

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on June 11, 2012 at 22:31:29 pm

just one small comment . CAN WE ALL SAY AT ONCE BANANA REPUBLIC. Our ferefathors knew what would come and they tried to protect us from ourselves, so what do we do, we challenge it because it is so "outdated." Outdated, it has worked for us for over 200 years, so far. What I am seeing with the American population, especially our youth on Occupy Wall Street, is people forming sentences, having the parrots repeat them, and they aren't even insulted that their new mommies think that they are so stupid that they can't have an original thought. Let's keep America the way it has been. Has worked wonderfully for so many.

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on June 12, 2012 at 01:42:38 am

I don't see a Constitutional impediment to the NPV. It is best derseibcd as an "extra-Constitutional" act perhaps outside the authorized scope of any government. The electoral college works well: 1. It protects the freedom of individuals (we vote by state just like every other federal elected office), 2. It reduces fraud, 3. It reduces the influence of counting errors a very common malady, 3. It ensures the winner succeeded only because he built a national coalition, and his challenger did not, 4. It current mechanism (minus NPV) reduces the use of the fail-safe House-of-Rep process.

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Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.