Tag: federalism

Why Do Libertarians Care about Federalism?

That’s the question NYU law professor Rick Hills asks over at PrawfsBlaws:

So why do American libertarians think that federalism is consistent with their commitment to individual liberty? Why not, instead, support a strong national government that can suppress subnational trade wars and protect a robust set of national liberties? What’s the payoff, in terms of individual liberty, from protecting subnational jurisdictions’ exclusive jurisdiction over certain topics?

In other words, if government is bad, why do we want a multiplicity of governments – federal, state, local – all presumably restricting individual liberty in some way?

Well, with all due respect to Prof. Hills – who also graciously commended Cato’s brief in Comstock, in which we argue that that Congress cannot enact a civil commitment statute for sexual predators because there is no such enumerated power and it cannot be inferred from the Necessary & Proper Clause – his analysis erroneously assumes that libertarians (he specifically mentions Cato, our senior fellow Randy Barnett, and our adjunct scholar Ilya Somin) are results-oriented in our approach to constitutional interpretation.  And we shouldn’t pursue federalism, he says, because it’s against our interests.

Both of these premises are flawed.  I won’t go into much detail because Randy and (the other) Ilya have already provided reactions at the Volokh Conspiracy here and here, with which I agree.  First , we like federalism because that’s the system the Constitution set up and luckily, the Constitution is, for the most part, a libertarian document.  Second, the Framers set up the Constitution that way because the different levels of government would exist not to multiply power-hungry bureaucrats’ opportunities for mischief but precisely to disallow dangerous aggregations of power.  So from the get-go there was no possibility of federal tyranny and, after the Fourteenth Amendment empowered Congress and federal courts to protect individual rights against state infringement, there was to be no state tyranny either.

And so, much as we like the strict limitations on Congress’s power – the express enumerations of Article I, section 8, the Commerce Clause, etc. – we also like the Due Process, Equal Protection, and Privileges or Immunities Clauses of the Fourteenth Amendment.  There is thus no conflict between federalism as a structural constitutional provision that promotes liberty and other, “anti-federalist” provisions that also promote liberty.  In practice that means there is no conflict between arguing that Obamacare exceeds the federal government’s authority while asking the Supreme Court to strike down Chicago’s handgun ban.  The original meaning of the relevant constitutional provisions support both arguments – and both arguments enhance liberty!

It really is a remarkable document, this Constitution.  Too bad its proper understanding has been lost

For related thoughts on this fascinating debate, Randy proposes a constitutional amendment that might get us back to the federalism we once knew while (the other) Ilya dispels another of Prof. Hills’s minor premises, that European libertarians diverge from Americans on the issue of federalism.

The States Respond to ObamaCare

Today Politico Arena asks:

Do the 13 state attorneys general have a case against ObamaCare?

My response:

Absolutely.  It will be an uphill battle, because modern “constitutional law” is so far removed from the Constitution itself, but a win is not impossible.  There are three main arguments.  (1) Under the Constitution, as properly interpreted, Congress has no power to enact such a plan.  (2) The plan conscripts state governments into carrying out and paying for federal mandates.  And (3) the individual mandate amounts to an unlawful capitation or direct tax.

The first argument will almost certainly lose, because under post-1937 readings of the Commerce Clause, Congress can regulate anything that “affects” interstate commerce, which at some level is everything.  Under modern “constitutional law,” that’s what we’ve come to – under the pressure of FDR’s infamous Court-packing scheme, a Constitution authorizing only limited government has been turned into one that authorizes effectively unlimited government.

The second argument has promise: In New York v. United States (1992) and Printz v. United States (1997) the Court held that the federal government could not dragoon state legislatures or executives into carrying out and paying for federal programs.  Yet that is just what’s at issue here with the “exchanges” that states are required to establish.  To be sure, the states can “opt out,” but as yesterday’s suit argues, with so many people already on the Medicaid rolls, that option is effectively foreclosed.  Indeed, the new bill will force millions more on to the Medicaid rolls, which is one of the main reasons these states, already strapped by Medicaid expenditures, have brought suit.  Florida alone estimates that the added costs will grow from $149 billion in 2014 to $938 billion in 2017 to over one trillion dollars by 2019.

The third argument holds the most promise.  ObamaCare compels individuals to buy insurance from a private company (why stop there? why not cars from GM?), failing which they will be required to pay a tax (fine?).  This is an unprecedented expansion of Congress’s power “to regulate interstate commerce.”  But even if it were to pass the modern Commerce Clause test, the tax should fail because it’s not apportioned among the states in accordance with their population.

Let’s be clear, however.  This suit was brought because the 13 states (and I predict more will follow) see the handwriting on the wall.  ObamaCare will mark the effective end of federalism as we’ve known it, will bankrupt the states, and, because of that – here’s the clincher – is but a  stalking horse for federal single-payer health care in America.  This suit will keep the issue alive until November, when the American people will have a chance to weigh in.

Six Reasons to Downsize the Federal Government

1. Additional federal spending transfers resources from the more productive private sector to the less productive public sector of the economy. The bulk of federal spending goes toward subsidies and benefit payments, which generally do not enhance economic productivity. With lower productivity, average American incomes will fall.

2. As federal spending rises, it creates pressure to raise taxes now and in the future. Higher taxes reduce incentives for productive activities such as working, saving, investing, and starting businesses. Higher taxes also increase incentives to engage in unproductive activities such as tax avoidance.

3. Much federal spending is wasteful and many federal programs are mismanaged. Cost overruns, fraud and abuse, and other bureaucratic failures are endemic in many agencies. It’s true that failures also occur in the private sector, but they are weeded out by competition, bankruptcy, and other market forces. We need to similarly weed out government failures.

4. Federal programs often benefit special interest groups while harming the broader interests of the general public. How is that possible in a democracy? The answer is that logrolling or horse-trading in Congress allows programs to be enacted even though they are only favored by minorities of legislators and voters. One solution is to impose a legal or constitutional cap on the overall federal budget to force politicians to make spending trade-offs.

5. Many federal programs cause active damage to society, in addition to the damage caused by the higher taxes needed to fund them. Programs usually distort markets and they sometimes cause social and environmental damage. Some examples are housing subsidies that helped to cause the financial crises, welfare programs that have created dependency, and farm subsidies that have harmed the environment.

6. The expansion of the federal government in recent decades runs counter to the American tradition of federalism. Federal functions should be “few and defined” in James Madison’s words, with most government activities left to the states. The explosion in federal aid to the states since the 1960s has strangled diversity and innovation in state governments because aid has been accompanied by a mass of one-size-fits-all regulations.

For more, see DownsizingGovernment.org.

Federal Aid to States Is Too Popular

The Economist’s Free Exchange blog asks: “[W]hy isn’t federal aid to states more popular, and popular enough to get through Congress, given that nearly every American lives in one?”

I would ask the blog’s author: How much more popular would he like it to be? As the following charts show, federal aid to state and local governments has catapulted to record levels.

As I’ve discussed elsewhere, Medicaid has been driving the growth in federal subsidies to state and local governments. But other areas, such as education, income security, and transportation, have also seen substantial increases.

Subsidizing state and local government is quite popular with federal, state, and local policymakers and associated special interests. It’s doubtful the average citizen is aware that so much of their state’s spending is derived from their federal tax dollars. However, I suspect that most folks (who aren’t on the take) would frown upon the concept of sending money to Washington only to have politicians send it back to the states via the federal bureaucracy. While there may be popular support for many of the state programs funded with federal dollars, citizens need to understand that federal subsidization of state and local government has fueled unhealthy government growth at all levels.

Kent Conrad and Fiscal Federalism

Senator Kent Conrad (D-ND) has a reputation for being a “deficit hawk.” But the bar is apparently so low in Washington that merely paying lip service to “fiscal responsibility” is enough to earn you the hawk title in the press. In reality, Conrad is a tax and spender as a story in today’s Wall Street Journal demonstrates.

These examples illustrate Sen. Deficit Hawk’s commitment to deficit reduction and fiscal responsibility:

  • “Like many in Congress, he is conflicted. He boasts a 23-year record of looking after North Dakota voters with ample farm subsidies, aid for drought-hit ranchers, defense spending and scores of pet projects. He has done little to help rein in Medicare and Social Security expenses—the U.S.’s biggest budget busters.”
  • “He has been a defender of the state’s grain farmers ever since [his election to the Senate in 1986]. He voted last April against a proposal to cap federal payments to the nation’s farmers at $250,000 per farmer per year, a measure that Mr. Conrad criticized as disastrous but that supporters said would have saved $1 billion a year.”

  • “He also helped draft a five-year, $300 billion farm bill in 2008 that boosted overall farm subsidies. The bill created a $3.8 billion emergency ‘trust fund’ for farmers who lose crops or livestock to natural disasters, which was Mr. Conrad’s idea. Since 2008, North Dakota ranchers have received $23 million under the fund, second only to Texas.”
  • “Mr. Conrad also has used legislative earmarks—provisions inserted into bills by lawmakers to fund local projects—to deliver federal money to North Dakota businesses, cities and schools. He secured $3 million last year to build a new terminal at the Grand Forks airport, and $13 million more for a fire station at a nearby air base. Dickinson State University got $600,000 to build a Theodore Roosevelt Center, while a Navy research project got $1.2 million to develop a ‘chafing protection system.’ ”
  • “In 2003, Mr. Conrad joined most Democratic senators to support Mr. Bush’s plan to provide Medicare prescription-drug coverage to seniors, at a cost of around $40 billion a year. The plan required Congress to scrap the spending controls Mr. Conrad once championed. Republicans won the votes of Mr. Conrad and other rural senators by agreeing to expand the program by pumping $25 billion more into rural hospitals and doctors over 10 years.”
  • “Mr. Conrad helped negotiate the 2005 highway bill, which critics blasted as a bipartisan exercise in spending excess. The $286 billion bill contained 6,371 earmarks. Even before Mr. Bush signed it, Mr. Conrad told constituents that the bill would deliver $1.5 billion to North Dakota communities. ‘That equates to North Dakota receiving $2 for every $1 in gas tax collected in the state,’ Mr. Conrad said in a news release.”

It would appear that Conrad doesn’t really want to cut spending to rein in deficits. He wants to increase taxes. One might think a proponent of tax increases in a red state like North Dakota would struggle at the ballot box. However, the Wall Street Journal article cites Tax Foundation data showing that North Dakota receives $1.68 in federal spending for every $1 it sends to Washington in taxes. In other words, Conrad’s tax increases would allow him to buy more votes at the expense of taxpayers in other states.  A North Dakotan is quoted as saying, “The joke here is that we elect conservatives to state office because we don’t want them to spend our money, and liberals to national office because we want them to spend other people’s money.”

This is a precisely why a return to fiscal federalism is crucial to getting spending-driven deficits under control. In the meantime, let’s stop calling politicians who want to spend more money and increase taxes to pay for it “deficit hawks” or “fiscally responsible.”

Food Stamp Use Soars and Stigma Fades

That’s the title of a piece in Saturday’s New York Times. That welfare usage is up in a recession isn’t surprising, but if the stigma is truly fading it’s not a positive development. As a Cato essay on food subsidies states, “The [food stamp] program contributes to long-term dependence on government and produces various social pathologies as side effects.” Disturbingly, the USDA official who oversees the program is pleased:

Although the program is growing at a record rate, the federal official who oversees it would like it to grow even faster. ‘I think the response of the program has been tremendous,’ said Kevin Concannon, an under secretary of agriculture, ‘but we’re mindful that there are another 15, 16 million who could benefit.’

There are certainly people in need of assistance, but the government is the wrong delivery system. Michael Tanner sums up why in his book, The Poverty of Welfare:

In the absence of government welfare, the civil society can be expected to rise to the occasion, as it always has, to address the needs of the poor in a way that is both more compassionate and more effective. No government program can provide the degree of flexibility and diversity of private ones. But perhaps more importantly, voluntary, private charity treats both givers and recipients as individuals, fully respecting their worth and dignity. Unlike the coercive nature of government, private charity understands that true charity starts with the individual and that individual’s choice to give out of individual conscience and virtue.

The Times piece goes on to provide anecdotal cases of food stamp recipients who traditionally harbored negative views of the program. In an example of why federalism needs reviving, we learn that one fellow “gave in” when “an outreach worker appeared at his son’s Head Start program.”

The outreach worker is a telltale sign. Like many states, Ohio has campaigned hard to raise the share of eligible people collecting benefits, which are financed entirely by the federal government and brought the state about $2.2 billion last year. By contrast, in the federal cash welfare program, states until recently bore the entire cost of caseload growth, and nationally the rolls have stayed virtually flat.

If the outreach worker is a state government employee as the article appears to indicate, it means his or her salary is funded by taxpayers. This person’s job is to go to a Head Start program, which is also funded by taxpayers, to encourage people to sign up for additional government benefits to be funded by – drum roll – taxpayers.

We would have a more efficient government welfare system if the state governments that wanted to have welfare programs had to fund them using state tax revenues, without the subsidies and incentives for profligacy from Washington. Even better would be to allow individuals to control funding for charitable causes through private contributions without a bloated government welfare system at all.

California Illustrates Need to Revive Federalism

The state of California recently received $60 million in U.S. Department of Labor stimulus funds to upgrade its 23 year-old unemployment benefits system. But according to the Associated Press, California is yet to spend $66 million it received from Labor in 2002 to upgrade its system. The price tag isn’t whopping by federal standards, but it is another reminder of the need to return to fiscal federalism.

Apparently, the Department of Labor couldn’t care less:

The federal government has no plans to sanction or fine California for not completing the original technology upgrade. The Labor Department said it was more concerned that new stimulus funding is used in a way that will allow more workers to qualify for unemployment assistance.

At the same time, California’s unemployment insurance fund is $7.4 billion in the red, which has forced it to “borrow” $4.7 billion from the federal government. According to an editorial in the Oakland Tribune, California increased the generosity of its unemployment benefits when the economy was healthy, but now that the economy is stagnant spendthrift policies are creating a fiscal crisis.

Alan Reynolds reminds that the federal stimulus package “bribed states to extend benefits — which have now been stretched to an unprecedented 79 weeks in 28 states and to 46 to 72 weeks in the rest.” When you subsidize something you get more of it—federal subsidies prompt more state subsidies to the unemployed, which generates more unemployment. Alan concludes that “the February stimulus bill has added at least two percentage points to the unemployment rate.”

California’s unemployment rate of 12.5 percent is the state’s highest since the end of the Great Depression. Once again we see that when the line of responsibility between federal and state government is blurred, the result is more of both and poor policies compounded.