| June 8, 2012

Competitive Federalism: Leveraging the Constitution to Strengthen Oklahoma

The federal government is financially broke. Because it is not restricted by a balanced budget requirement, it constantly spends money it doesn’t have. With the upcoming presidential election, there is no better time than now to have a vigorous debate on how we can best pull our country back from the fiscal brink and reinvigorate American Exceptionalism.

Americans face two stark choices: raise taxes to cover the ever-increasing costs of government, or realign government spending to fit the generous tax revenues Americans already provide to government. While cutting poorly performing programs is necessary, a core component of this latter choice must be to lower government costs by eliminating inefficiencies and increasing competition.

Central to this competition component is reconsidering the proper roles and responsibilities of and between federal and state governments. We’ve tried the centralization of power in the federal government for the last 80 years. It hasn’t worked.

We must move the discussion to the real issue—where do Oklahomans want the locus of government power over their lives to reside?

Given the disdain citizens have for the federal government and its poor track record, Oklahomans would prefer to deal with their state and local governments. Those governments, while certainly not perfect, are much closer to us and, therefore, far more transparent and accountable.

The 10th Amendment purposefully promotes competitive federalism by limiting the powers of the federal government and reserving remaining powers to the states. By so doing, our Founding Fathers guaranteed the states would serve as laboratories of competition within the contours of the Commerce Clause in Article I, Section 8. Alexander Hamilton identified this competitive friction in Federalist No. 7 when he wrote: “Competition of commerce would be another fruitful source of contention.” James Madison submitted in Federalist No. 44 that the Commerce Clause struck a proper balance that still permitted states “reasonable discretion” over commerce.

In discussing the general power of taxation, Hamilton notes in Federalist No. 34:

As this leaves open to the States far the greatest part of the resources of the community, there can be no color for the assertion that they would not possess means as abundant as could be desired for the supply of their own wants, independent of all external control. That the field is sufficiently wide will more fully appear when we come to advert to the inconsiderable share of the public expenses for which it will fall to the lot of the State governments to provide.

With the only limitation of the Commerce Clause placed on states over commerce and tax policies, the ability of states to compete with each other was “sufficiently wide.”

Under this competitive system, America rose from an agrarian society in 1787 to a global economic power by the turn of the 20th century. This powerful system remained an effective tool until the rapid growth of federal powers beginning in the New Deal era, when the Supreme Court interpreted both the Commerce and Necessary-and-Proper clauses far more broadly than founders intended. As the federal government expanded its powers into the smallest corners of our lives and issued one-size-fits-all policies and mandates, our ability to hold government accountable receded. Similarly, the ability of states to compete with each other on crucial policy issues grew weaker.

The nationalization of our lives implicitly contained an anti-competitive mentality. Liberal-progressive adherents abhor competition and seek to mandate an equality of outcomes in both our public and private lives. Permitting states to compete undermines this belief that America ought to operate as a monolithic, centralized political entity modeled not on the tripartite sovereign system embedded in our Constitution, but rather on the European Union. We must inject competition back into the fabric of our governments.

In Federalist No. 45, Madison clearly articulated the constitutional balance of power between the federal government and state governments as drafted by the Founding Fathers. Madison wrote:

The powers delegated by the proposed Constitution to the federal government are few and defined. Those who are to remain in the State governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace, negotiation, and foreign commerce; with which last the power of taxation will, for the most part be connected. The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State.

No matter your ideological views, few Americans today would claim that the federal government’s powers are “few and defined” and that the states’ powers are “numerous and indefinite.”

The broad brushstrokes of unconstrained federal power perpetually inhibit states from solving America’s toughest challenges. Federal laws, rules, and regulations constrain states from freely acting on virtually every subject matter.

To rebalance the powers and honor our constitutional heritage, Oklahomans should embrace competitive federalism. The issues ripest for applying competitive federalism are education, Medicaid, and transportation. These three issues are typically among the largest parts of state and local budgets. It is simply disrespectful of our shared sovereignty system to have such enormous budgetary issues driven by decisions in Washington, D.C. States are more than capable of deciding how best to educate our children, tend to our poor, and maintain our infrastructure.
Competitive federalism requires a reduction in federal taxes. With full control over issues, states, as Hamilton recognized, must retain the tax dollars of their residents so they directly can fund the programs. Because a meaningful amount of the federal bureaucracy and mandates will no longer be funded and the state and local government bureaucracy erected to comply with federal dictates would be dismantled, the net impact on Oklahomans of cutting federal taxes and raising state taxes will result in meaningfully lower net taxes.

By leveraging competitive federalism, we can meet the needs of Oklahomans more efficiently and more effectively and do so at a lower total cost. With more than 40 cents of every federal tax dollar spent on bureaucracy, we can lower the total tax burden on Americans and dedicate a greater level of funding to producing positive outcomes. By returning programmatic and taxing power over these issues to the states, we will empower their elected officials to experiment and identify solutions that best serve the unique needs of their citizens. Each state can decide how generously to fund programs.

We must break from the status quo that is ineffective, inefficient, costly, and at odds with the Constitution. Oklahoma policymakers can lead the effort to empower states via competitive federalism to serve as laboratories of competition that identify and solve our toughest problems.

Our Constitution has the answer. Are we wise enough to use it?

OCPA research fellow Matt Mayer (J.D., The Ohio State University) is a former senior official at the U.S. Department of Homeland Security. Mayer also serves as a Visiting Fellow with The Heritage Foundation, where he heads the Federalism project. Mayer’s book, Homeland Security and Federalism: Protecting America from Outside the Beltway, argues for reversing the federalization of homeland security by returning power to states and localities.

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