Federalism at a crossroads.

• Author: Mackey, Scott
• Position: US politics - Cover Story

States lost ground to the feds in the 1980s. Will federal fiscal problems swing power back to them, or further erode the states' role in the federal system?

James Madison wrote in Federalist 39 that "... the proposed government cannot be deemed a national one; since its jurisdiction extends to certain enumerated objects only and leaves to the several states a residuary and inviolable sovereignty over all other objects."

Some 200 years later, states seem less than inviolable. They are being forced to limit spending on their own programs, particularly education, and to fund federal priorities like Medicaid and environmental protection--programs over which they have little control. And with $300 billion annual deficits as far as the eye can see, federal policymakers are talking more seriously about snatching a larger share of the states' tax base to reduce the federal debt.

Can states, the independent "laboratories of democracy," continue to innovate and govern when the federal government interferes in every aspect of their policy agenda?

Deputy Director of the Office of Management and Budget Alice Rivlin, in a book written before she took office, thinks the time is right for the federal government to devolve some powers upon the states: "The current confusion of responsibilities between federal and state government is undermining confidence in government and impeding the implementation of policies needed to restore a healthy economy. Sorting out |state and federal~ roles more clearly could break the logjam, help both levels function more effectively and improve both domestic and foreign policy."

In considering Rivlin's theory of "sorting out" federal and state responsibilities, it is important to view the context of recent federal actions that have brought American federalism to where it is today.

The Great Depression and the civil rights movement forced the federal government to play a more active role in economic and social policy. In the former case, economic "pump priming" was clearly beyond the capability of the states. In the latter case, states' failures to protect the civil rights of minorities resulted in federal intervention. Along with new civil rights laws, the federal government began to use federal funds as an inducement for states to provide programs and services. The feds also provided funds directly to local governments and community action agencies to help poor and minority citizens.

As these federal grants proliferated, states became overwhelmed by numerous, often overlapping, regulations requiring funds to be spent for specific purposes. The Reagan administration, with support from the states, succeeded in consolidating more than 140 categorical grant programs into a handful of block grants.

As part of his "new federalism," President Reagan in 1982 proposed that the federal government assume the full...