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September 2014 Policy Study, Number 14-4


A Citizens Introduction to Federalism: Federalism and the Future of Constitutional Government


Part V: A Brief Historical Review of Federalism



The New Deal’s constitutional revolution placed the doctrine of the “living” Constitution front and center, and the Court gave its blessing to the expansion of federal power:


By mid-20th century, the Court had abdicated its responsibility of judicial review in the areas most crucial to checks and balances: the protection of property rights and economic liberty; the guarantee that federal revenue would be raised only to provide for the ‘general Welfare of the United States,’ rather than to reward special interests; and the maintenance of the boundary between state and federal authority, particularly with respect to the regulation of commerce.[172]


Historian Morton Keller described the impact of the New Deal on American political history when he wrote:


It [New Deal] should be remembered not as an episode in some imagined long march of American reform but as a defining time, like the Revolution and the establishment of the new nation, that set the stage for and defined the terms of American politics and government for generations to come.[173]


The New Deal did signal a radical departure from constitutional limited government, and Hoover’s warnings in the 1932 campaign about Roosevelt moving the nation away from the Constitution were validated:


Whereas the proponents of the New Deal believed it was government’s role to pursue equality of outcome for every man, Hoover pointed away from such a European model back toward the distinctive American ideals of liberty, equality of opportunity, and the fair chance of Abraham Lincoln. When Roosevelt grew the size and reach of the federal government dramatically, it was Hoover who pointed out the debilitating effect of government regimentation on free markets and a free society and made the case for limited government. When the New Deal would readily overlook the protections of the Constitution whenever ‘we the people’ wanted to, it was Hoover who reargued the Founders’ case for federalism and the right of the people to be protected from their government.[174]


Roosevelt’s revolutionary alteration of the Constitution is also symbolized in his argument that not only does the federal government have the responsibility to provide economic security to the people, but new rights, provided by the federal government, were needed to provide economic security. Roosevelt argued that the original Bill of Rights, just as with limited government, was not capable of handling a modern industrial nation and the failures of capitalism.


In his 1944 State of the Union message, President Roosevelt revealed his “Second Bill of Rights”:


It is our duty now to begin to lay the plans and determine the strategy for the winning of a lasting peace and the establishment of an American standard of living higher than ever before known. We cannot be content, no matter how high that general standard of living may be, if some fraction of our people — whether it be one-third or one-fifth or one-tenth — is ill-fed, ill-clothed, ill-housed, and insecure. This Republic had its beginning, and grew to its present strength, under the protection of certain inalienable political rights — among them the right of free speech, free press, free worship, trial by jury, freedom from unreasonable searches and seizures. They were our rights to life and liberty. As our Nation has grown in size and stature, however — as our industrial economy expanded—these political rights proved inadequate to assure us equality in the pursuit of happiness. We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence. ‘Necessitous men are not free men.’ People who are hungry and out of a job are the stuff of which dictatorships are made.  In our day these economic truths have become accepted as self-evident. We have accepted, so to speak, a second Bill of Rights under which a new basis of security and prosperity can be established for all regardless of station, race, or creed.
Among these are:

  • The right to a useful and remunerative job in the industries or shops or farms or mines of the Nation;
  • The right to earn enough to provide adequate food and clothing and recreation;
  • The right of every farmer to raise and sell his products at a return which will give him and his family a decent living;
  • The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad;
  • The right of every family to a decent home;
  • The right to adequate medical care and the opportunity to achieve and enjoy good health;
  • The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment;
  • The right to a good education.

All of these rights spell security. And after this war is won we must be prepared to move forward, in the implementation of these rights, to new goals of human happiness and well-being.[175]


The “Second Bill of Rights” established the progressive welfare state that emerged with the New Deal and which has been expanded ever since. The federal government would now enter into these policy spheres, disregarding enumerated powers and the Tenth Amendment, and attempt to provide these “rights.” Out of the New Deal came the farm subsidy programs, increasing federal control of education, and federal intervention in almost all aspects of policy. The recent Great Recession is a consequence of federal intervention in housing, which created the housing and mortgage crisis, and the Patient Protection and Affordable Care Act, which has nationalized healthcare.


Mario Loyola, Senior Fellow at the Texas Public Policy Foundation, argues that “many Americans have rightly pointed to the New Deal as the fatal blow to the Constitution’s frame- work of limited and enumerated powers.”[176] This also is true for federalism, because with the emergence of the New Deal it signaled the end of dual federalism. With the era of dual federalism ending it was replaced by cooperative federalism or “marble-cake” federalism, which means that the lines between the federal and state governments become blurred. In other words the federal government claims a beachhead in traditional policy areas that are supposed to be the responsibility of the states. Cooperative federalism “is the integration of state and federal governments under an umbrella of federal control.”[177]


Loyola also argues that the states themselves share in the responsibility for the decline of the Tenth Amendment and the expansion of federal power:


Many defenders of liberty believe that the federal government robbed the states of their proper role as the vehicles of self-government. But that fatally oversimplifies what really happened. Far from being robbed of their Tenth Amendment prerogatives, state governments freely gave those prerogatives away, in exchange for protection from competition for themselves and their special interests.[178]


Under cooperative federalism the federal government ties the states by offering money or grants that have specific mandates to follow in order to receive the funds. The states become addicted to the federal money and become dependents of the federal government. “The New Deal expanded federal power not in order to displace state power, but to absorb it and reinforce it,” stated Loyola.[179]


Richard A. Epstein, a Constitutional lawyer and scholar, and Mario Loyola summarized the impact the Progressive Era and New Deal had on federalism:


The constitutional transformation began with the 16th Amendment, which allowed Congress to institute a real income tax for the first time, and the 17th Amendment, which provided for the direct election of Senators. These two changes gave the federal government a more national character and fueled its vast expansion. The legislative innovations of Woodrow Wilson marked the birth of the administrative state, with its shift of legislative power from Congress to the executive branch. Then came the New Deal, with its insistence on protecting key constituencies in labor and agriculture through national programs that were plainly outside Congress’s power to regulate commerce ‘among the several states.’[180]


In their essay “Saving Federalism,” Epstein and Loyola recall the warnings of Anti-Federalist Patrick Henry, who feared the Constitution would result in a “great consolidation of Government,” and as a result of the progressive assault on federalism, “Henry’s prediction rapidly became a reality.”[181]


Franklin Roosevelt’s New Deal was largely supported by the American people, who were frightened by the high unemployment rates and the devastating nature of the Great Depression. The New Deal would dominate postwar politics and Democratic administrations from President Harry S. Truman to John F. Kennedy, which would continue to push for progressive reforms by expanding the welfare and regulatory states. President Truman even called his domestic policy program the Fair Deal and President Kennedy launched his New Frontier. The Republican Party, which had been in the political wilderness as a result of the Great Depression and New Deal, also started to come to peace with the New Deal. President Dwight D. Eisenhower and other moderate Republicans called for moderation in American politics and often tried to distance themselves or even silence Republican conservatives who were trying to rally against New Deal liberalism. Ike’s moderate Republicanism translated into what many conservatives called the “Dime-Store New Deal.”


Another fundamental turning point in federalism occurred during the 1960s. President Lyndon Baines Johnson, who had assumed the presidency after the assassination of President Kennedy, wanted to become a second FDR, and Johnson’s vision was to continue the New Deal revolution. President Johnson’s presidency would be dominated by two main policy fronts: the war in Vietnam and his Great Society. As Eugene Hickok stated:


During the 1960s, President Lyndon Baines Johnson’s Great Society proposals thought to expand the legacy of the New Deal even more, with major national initiatives in education, housing, transportation, urban renewal, and poverty.[182]


“Through the use of grants and the creation of a huge national bureaucracy, Johnson sought to transform the nation through yet another enhancement of the role and power of the national government,” stated Hickok.[183] Johnson in his Great Society declared “war on poverty” and tried to use the force of the federal government to eliminate poverty.


Cooperative federalism, just as with the New Deal, was strengthened as the federal government increasingly tied the states to federal polices with the use of categorical grants and mandates, which require states to follow specific guidelines determined by the federal government in order to receive the funds. In regard to entitlements and health care, Johnson’s Great Society expanded the role of the federal government beyond that of Social Security. The passage of Medicare and Medicaid created a substantial entitlement program that would support economic security, just as Social Security. Medicaid would also be a joint federal-state program, which would provide health care to poverty-stricken individuals. Today the entitlement programs of Medicare, Medicaid, and Social Security consume the majority of the federal budget and Medicaid consumes a large share of most state budgets. The three entitlement programs are also placing a large financial burden on the nation and adding to the already heavy debt load with trillions in unfunded liabilities.


The Great Society also expanded the federal government’s role in education, as John Samples, Director of the Center for Representative Government at the Cato Institute, described:


The Constitution did not sanction national authority over education, and the Tenth Amendment stated that powers not granted were retained by the states. Nevertheless, Johnson set about centralizing power over education. The Great Society ‘witnessed federal intervention on an unprecedented scale into the realms of education policy that hitherto had been almost the exclusive preserve of state and local jurisdictions.’ The Elementary and Secondary Education Act of 1965 established a major new inroad in state and local funding and control over education. All spending in ESEA programs was categorical; the federal government provided the money and stipulated how it should be spent. Federal spending on education increased rapidly.[184]


This was also true for higher education, and “Congress began to subsidize higher education with abandon.”[185] “Between 1965 and 1968, the number of college students receiving federal aid doubled, while related spending tripled,” noted Samples.[186]


Under the Great Society, federalism was discarded by the Johnson administration to meet the goals of their war on poverty. John Samples explains the impact:


Data on the period show how far Johnson’s administration centralized power. Federal grant-in-aid spending for states nearly doubled between 1964 and 1968, a 68 percent increase in real dollars. More grant programs (210) were enacted during Johnson’s era than in all years dating back to the first grant in 1879. Almost all of these new grants were categorical, which means Washington dictated what would be done with the money. The influence fostered by the new spending reached a wider ambit of governments. The states were often bypassed to directly fund local, urban governments. The cities were not the only targets of largesse: cities, school districts, special districts, and some counties, as well as a range of nonprofit organizations began receiving grants.[187]




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