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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



Hayward noted that as Attorney General, Ed Meese “wanted to place a new emphasis on federalism, a concept that was ‘not a dead letter.’”[215] Just as with the theory of constitutional originialism, Meese wanted to place an emphasis on the proper role of federalism:


In several subsequent speeches over the next year, Meese laid out the issues sharply, arguing that the Supreme Court had improperly undermined federalism, questioning the constitutionality of independent regulatory agencies, and drawing a distinction between the Constitution and constitutional law as promulgated by the Supreme Court. This last argument represented a revival of the constitutional axiom, dating back to Andrew Jackson and Lincoln, of ‘coordinate review’ — that is, the view that all three branches, not just the Supreme Court, are entitled to interpret the Constitution.[216]


President Reagan’s time in office was successful with his ending of the recession and later victory in the Cold War, and he did turn American politics in a more conservative direction. Gordon Lloyd and David Davenport, both public policy scholars, summarized some of Reagan’s successes and the challenge he faced:


In the 1980s, as President, Reagan did cut government spending, tax rates, and federal regulations. Although all this took government back to its size of a decade earlier, the reductions were only temporary and big government marched on. This is the problem: government grows steadily, sometimes dramatically, for decades, and then one President tries to trim it, but ultimately only slows the long-term rate of increase.[217]


This is the New Deal dilemma. As John Samples stated:


Ronald Reagan and David Stockman [Director of the Office of Management and Budget] thought government had grown too large. They believed also that Americans had not been corrupted by life in the old regime. Cutting back the federal establishment would follow the will of the people. The faith in Americans was perhaps not wholly wrong, but it was too optimistic. The institutions and policies of the old regime created both a politics of entitlement and a people who favor the persistence of such benefits. In that way, the old regime partially changed the American character; it fostered dependence on government among the people culturally disposed to liberty.[218]


The Reagan Revolution did have a significant impact on American politics, but it failed to break the legacy of the New Deal and Great Society. The Reagan administration demonstrated that the rollback of the New Deal and Great Society or even the reform of these programs was extremely difficult.


The next major battle for the restoration of traditional federalism would occur during the 1990s. During the presidential election of 1992, President Ronald Reagan’s successor President George H. W. Bush brought a more moderate Republican philosophy back to the White House. The Bush administration was a disappointment for many conservatives who believed that President Bush failed to continue the Reagan legacy of pushing for limited government. Many conservatives supported former Nixon and Reagan advisor and political commentator Patrick J. Buchanan’s primary challenge against President Bush. The Republicans would be defeated in the 1992 election by Arkansas Democrat Governor William Jefferson “Bill” Clinton, who was considered a “New Democrat.” Bush also lost the election because of the independent candidate Ross Perot, who campaigned against the reckless fiscal policies and the increasing national debt and deficit.


President Clinton, who had campaigned on a centrist agenda, started his administration in a liberal direction in both foreign and domestic policy. Perhaps his biggest initiative, which became known as “Hillary-Care,” because of the influence of First Lady Hillary Clinton, was an attempted transformation of America’s health-care system. Nationalizing health care and creating a single-payer system was a long-term policy objective of the Progressive Movement. The result was a backlash against the Clinton administration during the midterm congressional elections of 1994. Under the leadership of Congressman Newt Gingrich (R-GA), conservative Republicans in the House of Representatives and in the Senate started to plan to take control of Congress.


Newt Gingrich would become the next leader of the Reagan Revolution and the principle architect of the “Contract With America” —  a pledge signed on the steps of the United States Capitol pledging to the American people a return to limited government. “The Contract, like all other good political documents, balanced what the public wanted with what the public needed,” wrote Lee Edwards.[219] Some of the principles of the Contract With America included a balanced budget and welfare reform. “It was a commonsense platform that at the same time represented a radical change from the way things had been done in the nation’s capital since the 1930s,” stated Edwards.[220] The commitment to a balanced budget and welfare both “threatened the New Deal.”[221]


Gingrich and the Contract With America swept the midterm congressional election of 1994 into a historic victory for the Republican Party:


The 104th Congress, of 1995-96, was the most important Congress of the twentieth century. Quite possibly it was the most important Congress in American history…But the Congress sworn in in January 1995 was anything but typical. In fact, this new Congress was hailed at bringing a ‘revolution’ to American politics. Part of it, of course, was that for the first time in four decades the Republicans had taken control of Congress.[222]


The Gingrich Revolution would now attempt to continue the Reagan Revolution, and as Lee Edwards wrote: “Gingrich declared that the 1994 election ‘signaled the end of the New Deal and Great Society eras.’”[223]


The Republican Congress led by Speaker of the House Newt Gingrich battled with President Clinton over a variety of issues, including taxes and spending. Although there was a budget compromise which led to a balanced budget, the fight over the budget resulted in a government shutdown, with the blame falling on the Republican Party because of the biased media reporting. Perhaps one of the largest legislative compromises between the Republicans and President Clinton occurred with the historic welfare reform measure. Since the Great Society, welfare rolls had expanded in the United States, and the Republican Congress during the 1990s pushed to reform welfare by turning welfare programs back to the states — this was an example of devolution and the New Federalism under Reagan. Many state Governors, such as Wisconsin Governor Tommy Thompson, were reforming welfare programs. In summarizing some of the key victories obtained by the Gingrich Revolution, Lee Edwards wrote:


In 1995 and 1996, Congress did away with New Deal era farm subsidies, passed a presidential line-item veto, transformed federal welfare policy by giving states broad authority to run welfare programs, and ended, for the first time, a federal entitlement program, Aid to Families with Dependent Children.[224]


John Samples wrote that “the party that controlled the House of Representatives from 1995 to 1997 tried to continue to fulfill Reagan’s legacy. It truly sought to turn back the growth of government in many ways.”[225] During the 1990s, as Lee Edwards wrote, “conservatives have also demonstrated that they can govern at the state level.”[226] During the 1990s conservative state Governors made progress in regard to welfare reform as well as spending and tax reductions.[227]


Unfortunately, the conservatism of the Gingrich Revolution did not last long, and federalism in recent years has been further harmed by a vast expansion of the federal government under the presidential administrations of George W. Bush and Barack Obama. President Clinton argued that the “era of big government” was over, but this was pure flummery and complete nonsense.  In the presidential election of 2000, Texas Governor George W. Bush won on a message of “compassionate conservatism.” The Bush administration was faced with enormous challenges such as the Islamic terrorist attacks on September 11, the wars in Iraq and Afghanistan, Hurricane Katrina, and the start of the Great Recession. Government spending escalated, and so did the powers of the national government. In education policy, President George W. Bush greatly expanded the federal government’s role in regulating education when he signed into law the No Child Left Behind Act. This is far different from President Reagan’s objective of eliminating the Department of Education. President Bush also expanded entitlement programs with Medicare Part D, but he should also be given credit for attempting to reform Social Security.


This vast expansion of federal power occurred with the support of Republicans, who bought into the idea of “compassionate conservatism” and that “big government can be used for conservative ends.”[228] During the Bush administration, spending also increased dramatically even though Congress passed the Bush Tax Cuts, and the reckless spending pushed the nation further into a debt crisis with our escalating national debt. Nevertheless, the Republicans during the Bush era went in the opposite direction of the Reagan administration concerning federalism. Michael Tanner, a Senior Fellow at the Cato Institute, wrote:


One might expect that as a former Governor, George W. Bush would have some appreciation for the principles of federalism. Indeed, shortly after he was elected, Bush pledged to ‘make respect for federalism a priority in this administration…’ The Bush approach to federalism has clearly reflected the influence and attitude of big-government conservatives.[229]


President Bush’s philosophy of “big-government conservatism” made the Bush administration more in line with President Franklin D. Roosevelt and President Harry S. Truman than President Ronald Reagan. As Michael Tanner stated:


Reagan’s embrace of federalism, while imperfect, was a legitimate attempt to establish separate state and federal spheres of government. For example, Reagan would have had the federal government assume total responsibility for the Medicaid program, while making states responsible for welfare programs such as welfare and food stamps. He sought to cut back on federal involvement in education and called for abolishing the Department of Education. The number of federal grants to state and local governments declined from 434 when Reagan took office to a low of just 303 in 1982.[230]


Both President Reagan and Speaker Gingrich attempted to fight for the restoration of federalism, but President Bush and many Republicans in Congress bought in to the terrible philosophy of “big-government conservatism,” which not only has harmed conservatism, but also the future of constitutional limited government. Perhaps the best contribution President George W. Bush made is in the area of his two appointments to the Supreme Court, Chief Justice John Roberts and Associate Justice Samuel Alito.


In the aftermath of President George W. Bush’s administration, another significant setback occurred for traditional federalism. The election of President Barack Obama in 2008 is resulting in a constitutional transformation of the United States. During his campaign for the White House, then-Senator Obama ran on a message of “hope and change” and a promise to transform the country. President Obama has continued the expansion of the federal government at an alarming pace. Although President Bush and the Republicans in Congress can share some of the blame, under President Obama federal spending has escalated to dangerous levels. The federal budget is an estimated $3.6 trillion and the nation could soon see the first $4 trillion budget. In addition, the administration ran trillion-dollar deficits, and although those deficits are getting smaller, the national debt of over $17 trillion is still growing larger by the day. This does not include the unfunded liabilities of entitlement programs such as Social Security, Medicare, and Medicaid. As The Heritage Foundation recently reported:


Long-term unfunded obligations in Medicare and Social Security alone reached nearly $49 trillion, according to the 2014 report from the Social Security and Medicare Boards of Trustees. That’s nearly three times the size of the total national debt of $17. 6 trillion, or more than $150,000 for every person in the U.S…In other words, Congress would need to set aside nearly $49 trillion today to fund those benefits in the future.[231]


President Obama and Democrats in Congress have also drastically expanded the administrative state through a massive increase in regulatory activity of the economy through various federal agencies such as the Environmental Protection Agency (EPA). Derrick Morgan, Vice President for the Institute for Economic Freedom and Opportunity at The Heritage Foundation, argues that Governors need to “stand up” against the expanding regulatory power of the federal government:[232]


In Washington, the executive branch is overreaching as never before, and Congress seems disinclined to do much to stop the Leviathan. For those who believe in limited government, the last best hope for resistance appears to be the nation’s Governors.[233]


Currently, in an attempt to fight back, “twelve states are suing the Environmental Protection Agency to deter impending restrictions on greenhouse gas emissions from coal-fired power plants.”[234] The war on coal emerging from the White House is hurting several states, and this is just one example of the excessive use of federal regulatory power.


In regard to education, President Obama is pushing for the Common Core, which is a further attempt to strengthen the federal government in education. Perhaps the largest expansion of federal power is the Patient Protection and Affordable Care Act, which nationalizes health care. During the presidential campaign of 2012, President Obama and the Republican nominee Governor Mitt Romney often debated health-care policy. Governor Romney, who instituted a sweeping health-reform plan in Massachusetts, defended his health-care policy as being in the federalist tradition. President Obama argued that Romney’s health-care reform in Massachusetts was a “blueprint” for the Affordable Care Act. Romney deflected this criticism by turning to federalism. He defended his health-care policy by stating that under federalism states are laboratories of democracy and his plan was for Massachusetts, and other states could look at what they did or try something else. Romney’s federalism argument was correct. Health care is a state responsibility.  


With the passage of the Affordable Care Act, President Obama achieved a long-term progressive goal of having the national government control health care, because as progressives believe, healthcare is a fundamental “right.” The Affordable Care Act is not only transforming health  care and insurance, but also creating economic problems. It is projected that the Affordable Care Act will cost an estimated $2.4 trillion over a ten-year period.[235]


Part of the policy of the Affordable Care Act is to expand Medicaid in the states. Medicaid is already a large portion of most state spending and the Affordable Care Act attempted to force states into expanding their Medicaid program. As Michael Tanner explained:


This Medicaid expansion was intended to be mandatory: all federal Medicaid fund­ing would be withdrawn if states refused to expand, but in National Federation of Independent Business v. Sebelius, the Supreme Court ruled that the Medicaid expansion ‘violates the Constitution by threatening States with the loss of their existing Medicaid funding if they decline to comply with the expansion,’ and struck down the provision allowing HHS to withhold existing Medicaid funds for failure to comply with the expansion. This ruling effectively made the Medicaid expansion optional. To date, only 21 states and the District of Columbia have expand­ed their programs.[236]


Supporters of the Affordable Care Act justified its constitutionality by stating that the Congress has the ability to regulate interstate commerce, which translated into the federal government forcing Americans to purchase a product. The Supreme Court rejected this, at least in Chief Justice John Roberts’s majority opinion, but the Court then justified that the individual mandate requiring the purchase of health insurance was proper under Congress’s taxing authority, even though this was not the original intent of the law, nor does it square with other constitutional provisions about the origin of revenue bills and direct taxation.


Derrick Morgan wrote that several Governors are resisting the Affordable Care Act and many “still refuse to accept more federal Medicaid money under the law, understanding that they would be on the hook for funding the unaffordable expansion later.”[237] The impact of the Affordable Care Act on the states will be severe, just as with the economy. States will be faced with “overburdened Medicaid programs, higher taxes, job-killing employer mandates, federal takeover of state insurance regulation, and increased insurance premiums.”[238]


President Obama’s expansion of federal power is alarming and the nation faces serious problems from high unemployment, a significant debt crisis which is described to be the most serious threat to our national security, out-of-control spending, and the enormous expansion of the regulatory power of the federal government, especially under the Affordable Care Act. The current battle over immigration policy is also significant, because many states will be paying for the fiscal burden of illegal immigration and many states are angry with the President’s refusal to deal with the border crisis. The beginning of the 21st century has not been good for the prospects of returning to constitutional limited government.




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