As established in the federal constitution, America’s national government was meant to be small and tightly focused on matters of truly nationwide scope. It is neither. Washington busybodies have usurped countless powers that, according to the clear language of the Tenth Amendment, were “reserved to the States respectively, or to the people.”
Oddly, both defenders and critics of American federalism tend to focus on the exceptions rather than the rule. While the original constitution did not clearly authorize the federal government to defend individual rights and equal protection against encroachment by states and localities, the post-Civil War amendments remedied that oversight.
So, no, I’m not talking about congressional legislation on civil rights. I’m talking about broad swaths of taxation, expenditure, and regulation — involving education, health care, local infrastructure, consumer protection, and a host of other concerns — that ought to be the responsibility of state and local governments to hash out on their own.
Among the selling points of a rejuvenated federalism is that, to be blunt, states and localities are on the whole better at the job of governance than Washington is or is likely ever to be. This is not a generalized indictment of federal politicians. Indeed, many start out as state or local politicians. It’s the rules of the game, not the qualities of the players, that produce poorer results in Washington.
For starters, and perhaps most importantly, almost all state constitutions require their annual operating budgets to be balanced, and insist that their localities do the same. These governments issue debt, of course, but they can’t borrow simply to pay their operating expenses, and in places such as North Carolina they generally can’t issue general-obligation debt without a vote of the people.
Balanced-budget requirements and other fiscal rules are certainly no panacea. Politicians constantly try to evade them, and frequently succeed. They move programs and expenditures “off budget,” shuffle them among multiple governmental units, or fiddle with effective dates. They promise spending far off into the future — on pensions and retiree health benefits, for example — and then don’t save sufficient money to finance the benefits.
Still, do you know what’s worse than fiscal constraints with loopholes? No fiscal constraints at all. According to the most recent estimates, state pension funds have promised a collective $4.1 trillion in future benefits and set aside $2.9 trillion in assets to finance them. The unfunded liability, then, is about $1.2 trillion. States have another $650 billion in unfunded liabilities for health benefits for their public-sector retirees.
That’s a lot of money. But it is dwarfed by Washington’s fiscal recklessness. Over the next 10 years, the federal government will under current law spend some $15.5 trillion more than it will collect in taxes. Neither President Trump nor his congressional opponents are offering a serious response to the problem. In fact, when the Manhattan Institute’s Brian Riedl tallied up all the new spending proposed by Democratic candidates for president, he came up with between $38 trillion and $48 trillion over the decade — not counting Bernie Sanders’ proposed $60 trillion to $85 trillion blowout.
Even if Washington confiscated every dollar received by every American in excess of $500,000 a year over the same period, that would yield only $11.8 trillion in new revenue. Reckless is too polite a term.
It isn’t just in fiscal governance that “lower” levels of government are higher in performance. Most state legislatures conduct their business according to reasonably fixed deadlines, including on the length of annual sessions (although North Carolina, alas, does not). They are more responsive to their constituents, in part because they generally represent many fewer people.
We should decentralize American policymaking and restore federalism for many reasons, including fealty to our constitution. Today’s argument is that it would simply produce better consequences. Different communities could pursue different approaches to solving public problems. Spending promises would bear more of a relationship to reality. Diverting so much of our political attention to Washington has done great damage. Let’s try something else.