BUDGET DIGEST: Federalism and the Federal Budget

What is Federalism? Federalism is the sharing of power between a central authority and its constituents – in the case of the United States, the federal government and the 50 states. The power distribution between the federal government relative to state governments is stipulated in the Tenth Amendment to the U.S. 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.”

Federalism and the Federal Budget. Throughout U.S. history, the division of power and responsibilities between the federal and state governments has oscillated, which has impacted the federal budget. House Budget Committee Republicans have argued that the current role of the federal government relative to state and local governments is not in line with the Founding Fathers’ intent: the U.S. political system has become a top-down approach to governing, dominated by federal mandates. The consequences of federal overreach have resulted in astronomical annual deficits and debt – now in excess of $23 trillion – for the federal government, and have burdened states with unfunded costs, untold hours in additional paperwork, and prescriptive measures that stifle innovation and prevent state and local governments from tailoring programs to suit the needs of their citizens.

Proposals to Restore the Principles of Federalism. Rejecting the notion that Washington knows best, Republican lawmakers have promoted policies that reduce federal mandates on state and local governments and encourage these institutions to address more of the nation’s domestic policy concerns. Such proposals to empower states include the following:

  • Removing the federal “strings” attached to Medicaid funding and allowing states more flexibility in designing Medicaid programs aimed at addressing their state populations’ specific health care needs.
  • Promoting state flexibility and choice for education programs by building off of the principles in the Every Student Succeeds Act.[1]
  • Reforming burdensome infrastructure regulations imposed by the National Environmental Policy Act (NEPA) of 1969,[2] including the Trump Administration’s recently proposed rule designed to “modernize and clarify the regulations to facilitate more efficient, effective, and timely NEPA reviews by Federal agencies in connection with proposals for agency action.”[3]

On Wednesday, January 15th, the House Budget Committee will hold a hearing titled, “Why Federal Investments Matter: Stability from Congress to State Capitals.” This hearing is an opportunity for members to emphasize the need to reinstate the principles of federalism in the federal budget by restoring state autonomy in key domestic policy areas. Restoring the intended state autonomy in these programs will result in delivery of higher quality, more efficient benefits and services for the entire nation in critical areas such as education, health care, infrastructure, energy, the environment, and employment.

[1] P.L. 114-95, enacted into law on December 10, 2015.

[2] P.L. 91-190, enacted into law on January 1, 1970.

[3] https://www.whitehouse.gov/wp-content/uploads/2020/01/NEPA-NPRM-01092020_Pre-publication-version.pdf