How Would Federalism Work?

By Kevin J. Price

"Restoring the Constitution" is a phrase that is catching on with people. So is "federalism" as people lament a national government that has become out of control and is spiraling our nation into a downfall. But many also wonder what, exactly, do these concepts mean?

Many have dropped the term "conservative" altogether, because there is really very little left to "conserve" these days. Taxes, regulation, and spending are out of control and the other institutions that have supported our liberties are either being abused or are in decline. The US is on the fast track towards socialism. We need a different paradigm to put our nation back on track. That is where the term "restoration" comes to mind. The United States has lost sight of the things that have made it the most free and prosperous country in the history of the world.
To "restore the Constitution," we would have to review the things the government can and cannot do according to our founding document. Article I, Section 8 lists the seventeen powers specifically enumerated to the federal government. All of these things are important and the government's function in these areas was suppose to be strong, in order to protect the liberties of every American. Some of the things allowed include standard weights and measures, coining money, post offices and post roads, the protection of intellectual property, and a national defense. Beyond these and a few other very specific items, there was not much for which the federal government was responsible.

So how did new medicines get regulated? How would certain industries be licensed? What about the many other things done today by the federal government, who would do them? This is where we get to the idea of "federalism." You see how it was designed to work clearly in the Tenth Amendment of the Constitution: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." That word, reserved, speaks of exclusivity. This was not a preferential view of public policy ("it would be best if the states and people took care of these things"), but a mandate (if it is not listed in the US Constitution, it is for the states and the people).

The vast majority of regulations that exist throughout state governments came into place from states watching the works of one another. With the many states, our country had a vibrant laboratory with new ideas being brought to the surface and each state emulated those laws that worked best. This system worked very well. As the rest of Western civilization largely limped through the 19th Century with stagnant economies and governments in excess, the US was a vibrant powerhouse that focused on industry and innovation. Government did not get in the way, but largely cleared the way for progress.

The ideas behind this system are both simple and profound. The state governments had virtually unlimited powers, but limited amounts of money. It could not "print money" to fund its programs, because only the federal government had the power to do such. On the other hand, the federal government only had 17 powers and it had no reason to use inflation as a vehicle to fund its programs. This contributed to the value of the US dollar remaining constant from the era of the founding until the early part of the 20th century (during the New Deal we began to devalue our currency to pay for "extra Constitutional" or unconstitutional government programs).

Money was not the only restraint put on the states, but also good old fashion competition. If any one state became too excessive in its regulations, taxation, generosity in social spending, or in any other way, people could (and would) vote with their feet to go to places with more fiscally responsible environments. During the early 19th century, the Whig Party's "internal improvements" program (very similar to earmarks today) had a devastating effect of state budgets around the country and led to massive migrations nationwide because of the high taxes that followed. In no time every state, except for Massachusetts, had prohibitions against such programs placed in their constitutions. Since people could leave states because of policies that were economically harmful, all states tended to demonstrate much more restraint in their spending and regulations, which led to greater prosperity for the nation as a whole.

Federalism works. It is in decline today only because of the appetite of the federal government. The national failures seen throughout the federal government today -- inflationary monetary policies, unemployment out of control, and a debt growing exponentially -- are all very eloquent arguments for restoring both the Constitution and federalism.

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Kevin Price
Host, Price of Business, M-F at 11 am on CBS Radio News
Frequently found on Strategy Room at FoxNews.com
Syndicated columnist whose articles appear on a variety of media outlets.
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