Coercion vs. Cooperation

Mario Loyola has a new essay on America’s broken federalism, a subject I find supremely interesting. According to Loyola, Congress has effectively commandeered state governments with the sweet lure of borrowed money:

The dramatic expansion in the American public sector since World War II has occurred almost entirely at the state level: As a share of GDP, Federal revenue has remained steady while state revenue (not including Federal assistance, which has exploded in recent years) has nearly tripled and has almost pulled even with Federal revenue. [Michael] Greve is almost certainly correct that this expansion has been due to the collusive intermingling of state and Federal finances. Worse, the collusion readily lends itself to the formation of state fiscal cartels in Congress—cartels designed to diminish regulatory competition and diversity among the states and impose the preferences of uncompetitive states on everybody. In 1926, for example, Congress adopted a Federal inheritance tax coupled with an offset for state inheritance taxes. This not only neutralized the competitive advantage of states with low tax rates but also strongly incentivized states to raise their rates. Among the effects of this whole arrangement is the exacerbation of inequalities between rich states and poor states (especially through the vehicle of matching funds) and the amplification of cyclical state fiscal crises. And when this fiscally fueled takeover of state governments runs into the political limits of what Congress can tax, Congress does what no state can do: It borrows to the tune of trillion-dollar deficits. 

The increase of state revenue as a share of revenue might look like an indication of the robust exercise of local autonomy. Rather, state governments have been seduced by the prospect of “free” federal money to finance the expansion of new programs over which they have only very limited control. The federal government tightly prescribes what this programs can and can’t do, yet it’s relatively rare that Washington demands a rigorous accounting of how effectively money is spent. 

Moreover, these voluntary programs are in practice very coercive:

The distinction between the Federal commandeering of state governments, which is prohibited, and cooperative Federal programs that states are theoretically free to turn down, which is allowed, is an utterly illusory one because in either case there is a penalty. If officials disobey a legal requirement, they may be dismissed, and are subject to writs of mandamus and criminal penalties. But if they don’t accept “voluntary” Federal grants (and comply with the attached conditions), there is also a penalty: The tax revenue their citizens have already contributed to the program will be transferred to other states and they will lose all use of it. And if states don’t accept Congress’s invitation to implement Federal law “voluntarily”, the Feds take over, diminishing the state’s regulatory autonomy. [Emphasis added]

This is the impetus for Greve’s proposal that residents of states that opt out of cooperative Federal programs be given tax rebates the reflect the value of the Federal grants.

Reihan Salam — Reihan Salam is executive editor of National Review and a National Review Institute policy fellow.

Most Popular

Law & the Courts

Obstruction Confusions

In his Lawfare critique of one of my several columns about the purported obstruction case against President Trump, Gabriel Schoenfeld loses me — as I suspect he will lose others — when he says of himself, “I do not think I am Trump-deranged.” Gabe graciously expresses fondness for me, and the feeling is ... Read More
Politics & Policy

Students’ Anti-Gun Views

Are children innocents or are they leaders? Are teenagers fully autonomous decision-makers, or are they lumps of mental clay, still being molded by unfolding brain development? The Left seems to have a particularly hard time deciding these days. Take, for example, the high-school students from Parkland, ... Read More
PC Culture

Kill Chic

We live in a society in which gratuitous violence is the trademark of video games, movies, and popular music. Kill this, shoot that in repugnant detail becomes a race to the visual and spoken bottom. We have gone from Sam Peckinpah’s realistic portrayal of violent death to a gory ritual of metal ripping ... Read More
Elections

Romney Is a Misfit for America

Mitt’s back. The former governor of Massachusetts and occasional native son of Michigan has a new persona: Mr. Utah. He’s going to bring Utah conservatism to the whole Republican party and to the country at large. Wholesome, efficient, industrious, faithful. “Utah has a lot to teach the politicians in ... Read More
Law & the Courts

What the Second Amendment Means Today

The horrifying school massacre in Parkland, Fla., has prompted another national debate about guns. Unfortunately, it seems that these conversations are never terribly constructive — they are too often dominated by screeching extremists on both sides of the aisle and armchair pundits who offer sweeping opinions ... Read More
U.S.

Fire the FBI Chief

American government is supposed to look and sound like George Washington. What it actually looks and sounds like is Henry Hill from Goodfellas: bad suit, hand out, intoning the eternal mantra: “F*** you, pay me.” American government mostly works by interposition, standing between us, the free people at ... Read More
Film & TV

Black Panther’s Circle of Hype

The Marvel Cinematic Universe (MCU) first infantilizes its audience, then banalizes it, and, finally, controls it through marketing. This commercial strategy, geared toward adolescents of all ages, resembles the Democratic party’s political manipulation of black Americans, targeting that audience through its ... Read More