States handle welfare and state action has follow-along impacts outside their own borders

As the federal bargain moves in the direction of state power, it will have far-reaching consequences for the United States’ global profile and the conduct of U.S. foreign policy. Harnessed in the right way, the states can enhance U.S. power, providing new and more dynamic ways to advance an international agenda at a time of federal gridlock, while strengthening U.S. democracy at home. But as the  crisis illustrates, states can also be used to undermine the country’s longstanding alliances or even to subvert the democratic process. How leaders in Washington, the courts, diplomatic circles in different regions, and local and state governments approach this shift will determine whether state-level action becomes a source of resilience or a destabilizing force for Americans and the world.

THE EVOLVING FEDERAL BARGAIN

By outward appearance, the expansion of federal powers in the twentieth century has given Washington the advantage in the federal-state balance. The Civil War, after all, established the federal government’s control of the military as well as the illegality of unilateral secession by any state. And the civil rights movement cemented a broad understanding of federal power to enforce desegregation, voting rights, and school integration. Moreover, states are limited by balanced-budget requirements, as well as by their dependence on federal funds for between a quarter and a third of their budgets—giving the federal government considerable leverage in getting them to do its bidding. Congress has made liberal use of its spending powers, for example, to direct state policy on K–12 education, on the conduct of public officials through the Hatch Act, and on the expansion of Medicaid through the Affordable Care Act. Bolstered by constitutional provisions, such as the power to regulate interstate commerce and fund the military, the federal government can sometimes preempt state action.

But this account misses much of the story. For one thing, it is true that the federal government’s overall spending is slightly higher than the combined total spending of states and local governments ($4.4 trillion to $3.3 trillion, respectively, in 2019). But states dwarf the federal government in their budgetary impact on voters: setting aside military funding, service on the national debt, and entitlements, in most years states and their dependent local governments are responsible for the lion’s share of government expenditures. Together, they also employ a far larger workforce. As of 2020, state and local governments employed nearly 20 million people, whereas the federal government had only about 2.2 million civilian employees and 1.3 million active-duty military personnel. State and local administrations, not the federal government, set most of the policies that affect the day-to-day lives of their residents, including policies relating to policing, education, land use, criminal justice, emergency response, and public health. States have far more control over education policy, providing over 90 percent of funding for schools in almost every state. Moreover, the federal government depends on states to implement nearly all major federal policies, including the most costly: health insurance and welfare. As states implement federal policy, they exercise discretion, adjusting it around the margins to suit their own interests. And thanks to their sizable economies, the largest states can make decisions that have an impact beyond their own borders. All this has meant that the federal system is far more adaptable, and states far more powerful, than has generally been recognized.

Particularly striking is the extent to which states can be centers of policy innovation. They have distinct economies, and although they vary greatly in size, even the largest and most diverse states have populations whose interests and attitudes are more cohesive than those of the country at large. States also tend to be better at assembling big coalitions to support major policy action, and they do not have the kinds of procedural hindrances—the filibuster and the absence of the line-item veto—that often hamper the federal system. As a result, states have long been drivers of progress and change. As early as the nineteenth century, for example, Iowa, Massachusetts, and Pennsylvania lifted bans on interracial marriage, even as other states imposed them. Over time, however, states with bans repealed them as public support for interracial marriage grew; the Supreme Court’s landmark 1967 Loving v. Virginia decision extended the repeal to the federal level. Indeed, many of the most important federal policy changes—including ending slavery; expanding marriage rights, voting rights, and civil rights; changing health-care access, reproductive rights, and welfare coverage; reforming public education; and protecting the environment—were first tried at the state level, making states what U.S. Justice Louis Brandeis called “laboratories of democracy.”