The Price of Federalism

The Price of Federalism

The Price of Federalism

The Price of Federalism

Synopsis

What level of government should be responsible for welfare, education, transportation, and other programs? What are the proper roles of the local, state, and national government? What price do we pay for our federal system? Does federalism perpetuate social inequality? Does it stifle economic growth? More intensely than ever, these questions are at the center of ongoing debate in Congress, statehouses, and town meetings. In this important book, Paul E. Peterson, one of the nation's leading experts on urban problems and American government, addresses them by bringing together two theoretical perspectives on federalism: functional and legislative. He uses these perspectives to explain the changes in federalism that have occurred over the past thirty-five years and to examine the proposals included in the Republican "Contract with America". After showing how both theories help explain American federalism, Peterson concludes that the federal system has been evolving in a functional direction. As the costs of transportation and communication have declined, labor and capital have become increasingly mobile, placing states and localities in greater competition with one another. State and local governments are responding to these changes by overlooking the needs of the poor and focusing instead on economic development. Meanwhile, the national government has concentrated on social welfare policy. From this perspective, Peterson evaluates the Republican "Contract with America". He applauds its commitment to decentralizing transportation, education, and other basic services to state and local government. But he says that passing the responsibility for welfare to the states would only induce amongthem a "race to the bottom".

Excerpt

Seen in the perspective of 220 years of American history, the balance between the federal government and the states appears to involve the relentless accretion of power, resources, and responsibility to the national level. For any given generation of policymakers, however, this sense of inevitability evaporates in the heat of their immediate struggles over who does what and, perhaps even more importantly, which level of government pays the bills. The phenomenon is particularly apparent now as a noisy, populist-like reaction to the trend toward a larger federal presence dominates domestic politics. But sadly, the poetry appropriate for a constitutional debate is being swamped by the rough political prose of the mid-1990s.

The United States has the lowest total tax burden in the industrialized world; it is lower still if one focuses on revenues collected by the national government. It also has, among the modernized nations, the most decentralized government structure. America still lacks the extensive national social welfare structure that is the normal pattern, for example, throughout Western Europe. By Old World standards, we also have limited old age, retirement, health, and unemployment benefits. But a man from Mars arriving in the midst of the current debate in Washington might well imagine that a great revolution was necessary to reverse the excesses of some uniquely powerful and oppressive central state mechanism. The charge in Washington is to roll back just about every area of public activity. Even moderates fret that unless we do so the nation will be bankrupt at some point early in the next century.

Understanding why our politics has this special character is not easy, although the continuation of race and economic inequality as central domestic issues no doubt is at the heart of the explanation. Still, the ongoing debate would be immeasurably clarified if we shared a common comprehension of the facts of our governmental division of responsi-

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