What about federalism?

Jeffrey Sachs wrote a piece Time magazine entitled "How to Tame the Deficit" in which he makes some reasoned arguments that perhaps Democrats and Republicans could embrace.  For example make taxes less progressive while making spending more progressive.  But on this one idea he is boneheadedly wrong:
"Both Democrats and Republicans could also coalesce around another concept: fiscal subsidiarity. This doctrine holds that problems should be solved at the lowest government level feasible; it means that more federal revenue would be transferred to states, cities and towns, leaving less for programs directed from Washington. Democrats have traditionally looked to federal programs as key for social relief and public investments. Yet more than ever, sustainable reforms need local design and backing. Suppose that we finally agree to collect more revenue in order to boost spending on health care, education and clean energy. The increased taxes would be collected by the Federal Government and then transferred to state governments, which would design and implement the public programs together with local governments."

This is or should be an anathema to any self-respecting Republican.  It certainly is to any Libertarian or Tea Party member.  Now I am well aware this is common practice today, but to suggest even more?  What can possibly be gained by have the Federal Government to collect money that it doles back out to the states?

If certain relief programs and public investment are best provided for at the state level, the essence of Federalism, why should the Federal Government be involved in the first place?  How about applying the 10th amendment and have the Federal Government stop doing these things, stop collecting money to do these things, and simply let the states handle them.  An additional benefit of this is the elimination of states’ tendencies to implement "buy two, get one free" programs (so prevalent with the stimulus plan) that if they had to pay full price the voters would just as soon skip. 

In this way we significantly scale the Federal Government and provide the possibility of taming the deficit.  And we push safety social program spending to the states where the people can more directly influence the scope and scale of such programs.  If folk want to live in a high tax, high spend state such as California or a low tax, low spend state such as Texas, they can. 

But to further empower the US Congress as a middleman?  No way.

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2 Responses to What about federalism?

  1. Ed says:

    Just surfed upon your blog, and felt compelled to comment on your thoughts regarding this topic. My comments may indicate otherwise, but I too am a Federalist. I think the problem with ivory tower musings that we who love to opine often espouse ideological positions that sound great, but are rife with exceptions in the real world.

    There are two comments you make I would like to address: One is the question, paraphrased herein, why should the Feds be involved in local level programs, assuming local administration is preferable, perhaps superior? The other is the proposition that extends the concept of Federalism, namely the majority of taxation and tax policies should reside at the local level.

    While the federal government has taken on the appearance of Big Brother, many of the programs under its current jurisdiction can be justified. When these are tallied it becomes apparent a great deal of the national budget comprises these programs. For the sake of argument, let us discount two obvious programs, as they are the jurisdiction of the federal government per constitutional arrangements: national defense, and securing our borders. Omission of these two responsibilities considerably reduces the scale of the national budget befitting this debate. Nevertheless there are many other programs that appear on first blush to be local prerogatives, but end up being of national interests when viewed in a broader context. For example, Federalists often comment public right-of-ways should be under the management of local authorities, including funding policies, and maintenance standards. The problem arises when each locale decides to enact their own standards, especially considering traffic arteries and interstate right-of-ways. It is difficult enough navigating our byways without having to cope with a Tower of Babel caused by differencing standards regarding signage, and rules of the road. This issues takes on strategic importance when you consider good highways as one tool used to compete in the international market place. Imagine if all coastal states, some with vital ports of entry, maintained their road infrastructure at the minimal level, as practiced by Mississippi. And don’t think that can’t happen. In our fine state, California, Proposition 13 has the inadvertent consequence of under funding infrastructural maintenance programs traditionally financed by property taxes. We are on the verge requiring an overhaul of vast portions of our water and power infrastructure, yet we can’t even afford more than the bare minimum of bail wire repairs to keep what we do have functioning. The same goes for state and local highway infrastructure currently funded in part by gasoline and vehicle registration taxes. Another example is educational standards. I do not agree with the notion that states have the liberty to establish educational standards that essentially create an illiterate population. Yet historical precedence indicates this is exactly what some states will do, left to their own designs. This may seem their prerogative, but people do migrate, and why should other states be forced to contend with the burden of cross state immigrants possessing minimal job skills. In fact it can be argued the feds have a vested interest in establishing minimal educational standards since education is a critical consideration in the factors of production that will make us competitive against other nations, Hence there is good reason arguing why minimal educational standard should exist at a federal level, and that federal oversight is necessary to assure the funding necessary to achieve these objectives are available to all. That is not to say Big Brother shall be the sole policy maker in these regards; after all regional educational needs do vary. But we all benefit assisting less well off states in assuring the next generation is capable of facilitating international competition, rather than being a stone around the neck of our national economic wellbeing. Thus while I too wish to have more local control over how my tax dollars are spent – and how much I am taxed – the opportunities to localize many budgets and policy decisions currently under federal oversight are not as numerous as one would imagine.

    In fact playing musical chairs with social programs will do little to affect the national debt. GDP is capable of supporting only so many services, depending on how large GDP happens to be, per capita. This being true regardless if services are vended federally, locally, or privately. Even if we shifted all programs possible to a local level, the efficiencies this promises fall far short of alleviating out budgetary woes. The dilemma today is two fold: We simply consume far more than we produce; and we have a gross trade imbalance. If you want to address the debt, you need to eliminate these conditions. Hence the motto Made In USA describes the solution. Increase the revenue base and you obtain more tax revenue, even if no changes are made to marginal tax rates. We need federal policies that encourage business to locally produce the goods we consume; and tax those originating from countries with biased trade practices or exploitive labor conditions, such China and India. We should also shift income taxation from businesses per se, directing such taxes more directly at the shareholders, like any other income. We should encourage investing domestically. We should encourage market trading that is based on a valued added proposition and discourage trading guided primarily by speculative and arbitraging motives. We should in some manner provide incentives for businesses to conduct commerce within our borders, with export credits, import tariffs, and other national level policies aimed at leveling the playing field where capitalism is practiced in an international arena where the competition plays by different rules. Hence another motto we should well heed: Screw the World Free Trade Treaty! I describe the above policy as best implemented at a national level, but individual states also have the prerogative to institute their own incentive programs, to draw business to their populations.

    Lastly the whole debate over Federalism is somewhat archaic. We now find ourselves playing in the big leagues of world trade. Economies of scale do matter, though at some point it seems a system can be too big. That perhaps is the more salient issue. The old arguments supporting Federalism primarily rest with the notion that centralized government cannot effectively govern as a local body, whose ear is closer to its constituency. The problem is what defines too big? I argue the state of California is too big, both in terms of population numbers, as well as the differing regional needs. If this is true, it eclipses the Federalist argument, ponders the separatist argument, perhaps even suggests some variant of the city-state, if not tribalism. And while we are at it, it should be apparent part of the problem with capitalism is not regulation or lack thereof, but simply things have changed since its inception. Adam Smith did not consider the affect when markets with different cultures and environments become intertwined, when entities in certain markets become so large their failure collapses the entire network, and lastly the notion that Orwellian thought machines (computers) would dominate trading, employing formulas that have nothing to do with value added, or sustained growth. The question also beckons: what happens in a capitalistic society when vital and seemingly irreplaceable resources such as petroleum become scarce. Perhaps the social chaos of such a prospect is not worth the virtues a capitalistic system allegedly offers. We are ripe for a paradigm shift in the economic model that defines human commerce, yet what that system will be remains a mystery. Time for the smarties to sharpen their pencils…


    • Steve T says:

      Thanks for the reasoned argument, though much runs a bit aside from the point I was trying to make. Should the Federal Government tax and then send money to the states to fund things that are the province of the state or the locality? I’ll re-assert no.

      In my mind this isn’t an argument about who can do it better rather the Constitution specifically enumerates the responsibilities of the Federal Government, and Congress and the Supreme Court have interpreted the commerce clause broadly enough that there are a large number of things authorized to be in the federal purview. In these cases no argument with federal involvement. But there are a litany of areas in which the Federal Government intervenes that seem well beyond its granted authority. Health Care and Education come to mind. This is not to say an argument cannot be made for involvement in these areas, I can make the argument for. But I cannot get around the Constitution.

      I would like to see a healthy debate on the proper federal role in these (and other supra constitutional areas) and should that lead to amendments authorizing such then let the Federal Government tax and award monies to the states. That debate and resulting amendents are likely to focus the directon and nature of Federal involvement and set up the possibility that it might be effective.

      Let’s play with the education example. The current unauthorized situation is that the federal government is “involved”. What if we had a debate on what that involvement should be. Should it be in goals and achievement standards? Textbook standards? Classroom/facility standards? Let’s be specific, let’s codify these roles with an amendment, and then let’s actually fund the mandate. Using amendments for this purpose would force the debate, focus the extent and scope of each, and thereby control the federal reach into areas of agreed federal interest.

      Until then let’s keep things limited as enumerated in the Constitution.

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