Chapter 3 – American Federalism (OpenStax American Government, 3e)

Federalism Defined

• Definition & Core Idea

  • Form of government where multiple levels (national + subnational) act directly upon citizens and enjoy some autonomous authority.

  • U.S. context = federal (national) government + 50 constituent state governments (plus territories).

• Key Structural Features

  • Both levels derive power from the Constitution – not from each other.

  • Citizens live under two simultaneous sovereigns; allegiance and rights filter through both.

• Imagery & Everyday Recognition

  • Figure 3.1’s collage of state postcards symbolizes how diverse policies & cultures coexist under one Union.

Comparative Systems of Government

• Unitary System

  • Authority concentrated in central gov’t; subnational units act only with powers delegated downward.

  • Examples: United Kingdom, Japan, Sweden.

  • Graphic (Fig. 3.2) shows arrows flowing from center ➔ people & regions.

• Confederation

  • Sovereignty resides in states; center acts only with state consent.

  • Early U.S. (Articles of Confederation) & modern international bodies (e.g., EU in some respects).

  • Power flow = states ➔ center, opposite of unitary.

• Federation

  • Power split & derived from the people; both levels act directly on citizens.

  • Examples: United States (under Constitution), Canada, India.

Constitutional Framework for American Federalism

• Article I, Section 8 – Enumerated Congressional Powers

  • Tax & duties collection

  • Borrow money

  • Coin money

  • Establish inferior federal courts

  • Regulate interstate & foreign commerce

  • Raise/support armed forces

  • Declare war

• Necessary & Proper (Elastic) Clause – Art. I, §8, Cl. 18

  • Congress may pass all laws “necessary and proper” for carrying out enumerated powers.

  • Judicial trend: broad interpretation, esp. under the Commerce Clause.

• Reserved Powers – Tenth Amendment

  • All powers not delegated to U.S. nor prohibited to states are reserved to states or people.

  • Constitution intentionally omits a list for states, assuming residual authority.

• Limits on State Power – Art. I, §10

  • States cannot:

  • Enter treaties

  • Coin money

  • Tax imports/exports

  • Suspend habeas corpus, issue bills of attainder, or pass ex post facto laws

• Civil Rights Amendments as Constraints

  • 14th: Equal protection & due process against state infringement.

  • 15th, 19th, 26th: Voting rights – no denial by race, sex, or age (18+).

• Supremacy Clause – Art. VI, Cl. 2

  • Constitution, federal statutes, treaties = “supreme Law of the Land.”

  • State judges bound even when state law conflicts (if federal act is constitutional).

Fiscal Federalism: Revenue & Spending

• Primary Tool = Taxation across all levels.

  • Sixteenth Amendment (1913) authorized unapportioned federal income tax.

• Federal Revenue Composition – 2020 (Fig. 3.4)

  • 47\% individual income tax

  • 38\% payroll taxes

  • 6\% corporate income taxes

  • 3\% excise taxes

  • 6\% other sources

• State Revenue – 2018

  • 39\% taxes

  • 25\% federal support (grants)

  • 21\% other (lotteries, etc.)

  • 15\% service charges

  • Breakdown of state taxes: 47\% sales, 38\% individual income, 2\% property, 13\% other.

• Local Revenue – 2018

  • 37\% taxes

  • 30\% aid from federal & state

  • 20\% service charges

  • Local tax mixture: 72\% property, 18\% sales, 5\% income, 5\% other.

• Federal Outlays Snapshot (Fig. 3.6)

  • About \tfrac{2}{3} of budget = Social Security + health (Medicare/Medicaid, ACA, CHIP) + defense.

• State Fuel-Tax Dependence (Fig. 3.5)

  • 2007→2019 shift shows declining percentage of state revenues from fuel taxes nearly everywhere; ranges <1\% to \approx 10\% across states.

Intergovernmental Transfer Mechanisms

• Grants-in-Aid

  • 18th–19th C.: Land grants (e.g., Morrill Act ➔ land-grant universities).

  • 20th C.–present: Cash grants dominate.

  • Categorical: Narrow purposes, detailed conditions, heavy oversight (majority of grants).

  • Block: Broad purposes, fewer strings ➔ greater state/local discretion.

• Unfunded Mandates

  • Federal requirements without full funding (or any funding).

  • Common domains: education standards, ADA compliance, Clean Air/Water, homeland security.

  • Non-compliance can trigger financial penalties or loss of other grants.

• Marble-Cake Federalism (Morton Grodzins, Fig. 3.12)

  • Metaphor: intermingling responsibilities rather than neat “layer cake.”

Historical Evolution of Power Balance

• Early 1800s – Marshall Court

  • Broad use of Elastic Clause ➔ expanded national power; landmark commerce cases (e.g., Gibbons v. Ogden (1824)).

  • Marbury v. Madison (1803) established judicial review, reinforcing federal judiciary’s authority.

• Nullification Crisis & State Resistance

  • States (notably South Carolina) claimed right to void federal laws deemed unconstitutional.

  • Concept ultimately rejected post-Civil War.

• Civil War & Reconstruction

  • Slavery = flash-point of federal vs. state sovereignty (Fig. 3.8).

  • Union victory + 14th & 15th Amendments firmly elevated national supremacy; seceded states had to ratify to rejoin.

• Dual Federalism (≈1877–1930s)

  • Clear, separate spheres: states = police powers; feds = enumerated powers.

  • Illustrated by cartoons in Puck magazine (Fig. 3.9) critiquing limits on federal economic regulation.

• Cooperative Federalism (Great Depression/New Deal, 1930s–1960s)

  • Shared responsibility to tackle economic crisis (soup-kitchen imagery, Fig. 3.10).

  • Growth areas: social welfare (Social Security, unemployment), civil rights enforcement, environmental regulation.

• New Federalism (1970s–1980s)

  • Presidents Nixon ➔ Reagan sought to decentralize: revenue sharing, block grants, greater local discretion.

  • Examples: Head Start program continuity (Fig. 3.11 shows First Lady LBJ & President Obama with participants).

• Contemporary Competitive Federalism

  • Divergent state vs. federal stances produce policy “laboratories” and litigation (immigration protests, Fig. 3.15; LGBT rights progression, Figs. 3.16-3.17).

  • Issues: immigration enforcement, same-sex marriage pre-Obergefell, marijuana legalization.

Interest-Group Strategy in a Federal System

• Multi-Level Targeting

  • Groups choose forum shopping: pursue state action when federal path blocked (or vice-versa).

  • Example: marriage equality advocates first won in state courts/legislatures (Massachusetts 2003) before national victory in Obergefell v. Hodges (2015).

Benefits of Federalism

• Policy Innovation (“laboratories of democracy”)

  • Early women’s suffrage in western states ➔ 19th Amendment model.

  • State carbon-trading schemes, health insurance exchanges (e.g., Massachusetts ➔ ACA blueprint).

• Tailoring to Local Preferences while retaining national unity.

Drawbacks of Federalism

• Inequality Across States

  • Education funding gaps, Medicaid expansion disparities, income/health outcomes differ by geography.

• Administrative Complexity

  • Multiple bureaucracies ➔ potential duplication, conflicting regulations.

  • Compliance burdens for individuals & businesses operating across states.

Ethical, Philosophical, and Practical Implications

• Balance of Liberty & Union

  • Ongoing tension: safeguarding local self-government vs. ensuring national standards of rights & welfare.

• Moral Hazard of Grants/Mandates

  • Grants may distort state fiscal responsibility; unfunded mandates raise fairness concerns.

• Federalism as a Check on Power

  • Dual sovereignty aims to prevent tyranny, but overlapping authority can also obscure accountability.

Key Numbers & Formulas Recap

• Total of federal individual + payroll taxes =47\% + 38\% = 85\% of receipts.

• Federal budget “big three” ≈ \dfrac{2}{3} (Social Security + health + defense).

• Proportion of state revenue from federal grants \approx 30\%; local from intergovernmental aid >33\%.

Concluding Connections

• Federalism in the U.S. has evolved cyclically, expanding or constricting national power in response to crises, social movements, and political philosophies.

• Understanding its mechanisms—constitutional clauses, fiscal tools, and historical precedents—equips citizens and policymakers to navigate contemporary policy conflicts.

Federalism Defined

• Definition & Core Idea - Government where national + subnational levels act directly on citizens and have autonomous authority (e.g., U.S. federal + 50 state governments).

• Key Structural Features - Both levels derive power from the Constitution, creating two simultaneous sovereigns.

Comparative Systems of Government

• Unitary System - Centralized authority; subnational units get delegated powers (e.g., UK).

• Confederation - States hold sovereignty; center acts only with state consent (e.g., early U.S. under Articles).

• Federation - Power split and derived from the people; both levels act directly on citizens (e.g., U.S. under Constitution).

Constitutional Framework for American Federalism

• Article I, Section 8 – Enumerated Congressional Powers (e.g., regulate interstate commerce).

• Necessary & Proper (Elastic) Clause – Congress can pass laws "necessary and proper" for enumerated powers (broadly interpreted).

• Reserved Powers – Tenth Amendment - Powers not delegated to federal gov't, nor prohibited to states, are reserved to states or people.

• Limits on State Power – Art. I, §10 - States cannot coin money, enter treaties, etc.

• Civil Rights Amendments - Limit state power (e.g., 14th Amend. for equal protection/due process).

• Supremacy Clause – Art. VI, Cl. 2 - Federal law is supreme when Constitutional.

Fiscal Federalism: Revenue & Spending

• Primary Tool: Taxation (Sixteenth Amendment authorized federal income tax).

• Federal Revenue - Dominated by individual income tax (47\%) and payroll taxes (38\%).

• State Revenue - Major sources: taxes (39\%), federal grants (25\%); state taxes mainly sales and individual income.

• Local Revenue - Major sources: taxes (37\%), intergovernmental aid (30\%); local taxes primarily property.

• Federal Outlays - About \tfrac{2}{3} of budget for Social Security, health, and defense.

Intergovernmental Transfer Mechanisms

• Grants-in-Aid - Federal funds to states/localities.

  • Categorical: Narrow purposes, strict conditions.

  • Block: Broad purposes, more state discretion.

• Unfunded Mandates - Federal requirements without full funding, leading to state compliance burdens.

• Marble-Cake Federalism - Metaphor for intermingled responsibilities.

Historical Evolution of Power Balance

• Early 1800s – Marshall Court - Expanded national power via Elastic and Commerce Clauses.

• Nullification Crisis - States' attempt to void federal laws rejected.

• Civil War & Reconstruction - Cemented national supremacy (14th/15th Amendments).

• Dual Federalism (≈1877–1930s) - Clear, separate spheres for federal and state powers.

• Cooperative Federalism (1930s–1960s) - Shared responsibility to address crises.

• New Federalism (1970s–1980s) - Decentralization via revenue sharing, block grants.

• Contemporary Competitive Federalism - Divergent state/federal policies as "laboratories" and sources of litigation.

Interest-Group Strategy in a Federal System

• Multi-Level Targeting - Groups use "forum shopping" to pursue goals at state or federal level based on success likelihood.

Benefits of Federalism

• Policy Innovation ("laboratories of democracy").

• Tailoring to Local Preferences.

Drawbacks of Federalism

• Inequality Across States (e.g., education, Medicaid).

• Administrative Complexity (duplication, conflicting regulations).

Ethical, Philosophical, and Practical Implications

• Balance of Liberty & Union - Tension between local self-governance and national standards.

• Federalism as a Check on Power - Dual sovereignty aims to prevent tyranny but can obscure accountability.

Key Numbers & Formulas Recap

• Federal individual + payroll taxes = 85\%\ of receipts.

• Federal budget "big three" \approx \tfrac{2}{3}.