An observation of the state-federal relationship.

• Author: Pound, William T.

Federalism always has been one of the most significant features of the American constitutional system. Its future will likely see both cooperation and conflict. That's nothing new. Federalism is, by its nature, a system of dynamic tension between levels of government and is constantly evolving into new relationships between states and the nation.

The American constitutional division of authority between nation and state has been emulated by many other countries since 1787, but in few as successfully as it has developed in the United States.

Before the Civil War, states generally dominated American federalism. But a stronger national government emerged after the war and grew with the advent of the income tax, World Wars I and II, and the Great Depression. A reinvigoration of state government began in the 1950s, however, with the formation of The Advisory Committee on Intergovernmental Relations to strengthen federal-state-local relationships. With the modernization of state legislatures in the 1960s and '70s, a new balance in our federal system emerged.

The 1960s saw the creation of Medicaid, a shared state-federal program, and in the '70s, general revenue sharing provided unrestricted federal financial assistance to states and localities. This experiment with "no-strings" and non-categorical sharing of federal revenues did not have a long life, however.

The last 30 years have been a period of more balanced federalism. State governments, for much of the period fiscally healthy, have become the country's creative laboratories and the initiators of most of the innovation in public policy. Creative environment and energy legislation, novel education reform and inventive health policy all flowed from the states.

The current economic recession, which began in December 2007, is one of the greatest challenges to healthy federalism and to the ability of states to carry out their role as partners in the federal system. Fiscal shortfalls and constitutional requirements for balanced budgets restrain the capacity of the states to maintain their traditional priorities in K-12 and higher education, transportation and health care.

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At the same time, the ability of the federal government to deficit spend, particularly as a counter to recession, allows it to expand its initiatives and, if it desires, direct states to act in particular ways at a time when it is very difficult for them to resist.

The Obama administration has expanded the...