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Posts Tagged ‘state governments’

Is federalism for progressives? Libertarians, who are generally enthusiastic about the competitive federalism model, have tried to argue that the model provides, at the very least, a kind of modus vivendi for all ideological camps, allowing citizens in each state to have roughly the kind of government that they want. Relative to a single national standard on every policy issue, everyone is better off, right? Some progressives have agreed, to a point.

The problem is that status quo U.S. federalism is a long way from the competitive federalism model that scholars like Michael Greve favor. (I have contended that competitive federalism is still alive in the U.S. to a much greater extent than just about any other country excluding Switzerland and Canada.) The federal government establishes a firm national baseline on both economic and social policies. First, the U.S. Congress has authorized federal matching grants that incentivize state and local governments to spend their own taxpayers’ money on federal priorities. Even conservative politicians often have political trouble turning down “free” (better: “highly discounted”) federal money. Second, the U.S. Congress has authorized extensive federal regulations intruding into areas previously considered state prerogatives: securities and exchange regulation in the 1930’s (a provincial-only responsibility in Canada), occupational safety and health regulation in the 1970’s, mortgage originator licensing in the 2000’s, and health insurance regulation in the 2010’s, to name just a few examples. Third, the federal judiciary has established a firm baseline on civil rights, civil liberties, and “social” policies, repeatedly striking down laws regulating or criminalizing abortion, sodomy, contraception, and free speech, and, more recently, laws prohibiting gun possession and carrying, enacting public election financing, and authorizing certain regulatory takings. While some of these examples suggest that progressives might have reasons to favor a looser “baseline” from the federal judiciary, the overall historical trend has been for the judiciary to constrain conservative policies. (Note that libertarians typically favor judicial engagement on all or almost all of these questions, distinguishing their kind of limited-government federalism from the old “states’ rights” variety.)

Is there evidence that U.S. federalism as it already exists is tilted toward progressive priorities? I believe I have found such evidence in the distribution of state policy priorities.

Using the Ruger-Sorens database of state policies, which covers the years 2000-2010 (year-end), (more…)

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All 50 states ban the direct sales of motor vehicles from manufacturers to consumers. The politics of this regrettable policy are clear: auto dealers are powerful political players in every state, while only a few states actually have manufacturing facilities. Banning direct manufacturer sales benefits dealers while hurting manufacturers and consumers.

State governments continue to insert themselves into the contractual relationships between car manufacturers and dealers, typically to the ostensible benefit of the latter. The New Hampshire Senate recently passed a bill regulating the terms and conditions of dealer contracts with manufacturers, prohibiting manufacturers from requiring dealers to alter the appearance of their showrooms, for instance. (Disturbingly, the state director of Americans for Prosperity in New Hampshire supports the bill.) The bill is actually unlikely to change any “balance of power” between automakers and auto dealers. Automakers will simply respond by vetting potential dealerships far more closely and perhaps charging higher franchise fees. The onus of this response is likely to fall more on new dealerships than on incumbents. So the real losers from the bill are going to be potential entrants into the car dealer industry and, of course, consumers.

These are not the only examples of “state protectionism,” in which state governments adopt laws meant to reduce competition from out-of-state businesses for the benefit of local incumbents. Some states still prohibit certain out-of-state direct-to-consumer wine shipments. Regulatory barriers can accomplish the same ends. States have widely varying regulations on insurance products, making regulatory compliance a huge barrier for a company trying to market a standard policy in multiple states. For a long time, major life insurance companies lobbied Congress to adopt a national life insurance regulatory regime, pre-empting state laws. They were opposed by local life insurance agents, for whom knowledge of and compliance with distinctive state regulations were a significant source of competitive advantage. In the end, no national legislation materialized, but Congress authorized the formation of an interstate compact, essentially a contract among consenting states that sets up a single insurance regulator. More than 40 states have joined the Interstate Insurance Product Regulation Commission, which regulates life insurance and annuities.

Such state protectionism potentially runs afoul of the so-called “dormant commerce clause” of the U.S. Constitution. The commerce clause allows Congress to regulate trade among the several states. By implication, then, states are presumptively prohibited from burdening interstate trade, unless authorized by Congress. Unfortunately, courts have been reluctant to scrutinize state economic regulations that have an essentially protectionist character, although especially blatant discrimination against out-of-state imports has been overturned. (more…)

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Why do “red” states that tend to vote Republican in presidential elections take more federal money than do Democratic-leaning, “blue” states? This surprising correlation between ideology and federal dependence has been often noted (see for instance here, here, and here). Indeed, this fact seems to be trotted out whenever we hear “what’s the matter with Kansas/Connecticut” arguments from the left/right, respectively. Are conservative states hypocritical and liberal states self-abnegating, or is there some deeper explanation?

First, let’s take a look at that correlation. In the chart below, I’ve plotted each state with federal grants to state and local governments in that state, as a percentage of personal income, for fiscal year 2007-8, on the Y axis, and percentage of the vote for Obama, McKinney, and Nader in the 2008 election on the X axis. The line through the points represents the least-squares line of best fit. As you can see, there does indeed appear to be a negative relationship between liberal ideology and acceptance of federal grants.

Is the correlation statistically significant? To see this, I (more…)

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