Federalism fuels elite capture and kills democracy

If the United States has a civic religion, then federalism is certainly at the heart of it. Federalism—an institutional design by which constitutional authority is divided between multiple levels of government—is one of the defining features of the American political system. Among countries with federal systems, such as Canada, Germany, India, and Mexico, the United States is an extreme case, because American federalism is especially decentralized. Relatively low levels of fiscal redistribution exist between regions, and the federated structure divides power not only between the federal government and states, but also between states and localities (Anton 1989; Gerken 2010). The structure of American federalism puts critical democratic institutions, including the powers of policing, election administration, and legislative districting, in the hands of the state governments (Lowi et al. 2017). In this volume (Mickey) and elsewhere, scholars have investigated the role of state governments in threats to electoral and liberal democracy in the United States. We take a different tack by considering the democratic challenges of federalism through the lens of political inequality (Michener 2018; L. Miller 2008). We argue that the democracy-enhancing benefits of federalism disproportionately accrue to elites who are already advantaged in the political system, while the democratically corrosive burdens of federalism are disproportionately borne by those with the fewest resources (politically and economically).

Although federalism is a political institution that both constrains and enables democratic participation, we argue that it does so unevenly, and in ways that deepen inequalities in the processes of democracy. Furthermore, we propose four mechanisms by which the institutional decentralization of American federalism obstructs or reduces democratic accountability and equality: (1) inequality in venue selection: more powerful groups are better able to pick and choose which geographic locations and levels of government to get politically involved in; (2) information asymmetry: with multiple overlapping levels of government, it is hard for less powerful groups to monitor what governments are doing; (3) an unequal exit threat: wealthier individuals and groups can better threaten to leave a city or state to politically pressure governments; and (4) decentralized accountability: multiple levels of government make it hard to know which authority is accountable for tackling political and economic problems. Taken together, these mechanisms both create and exacerbate advantages for economic and political elites, while generating and deepening daunting barriers to the full and equitable inclusion of nonelites, especially economically and racially marginalized Americans. The dynamics we highlight below point to ways that U.S. federalism can undermine possibilities for a robust democracy by undergirding political inequality.

Decentralized U.S. Federalism

For much of the twentieth century, the United States experienced regional convergence (Caselli and Coleman 2001). Although it is worth noting that northern states were home to many forms of racial exclusion and de facto segregation, the Civil Rights Act of 1964 and Voting Rights Act of 1965 contributed to regional convergence by enforcing national baseline civil rights standards against state governments in the Jim Crow South. Poorer states in the South and Appalachian regions began to catch up with their coastal counterparts in terms of economic growth and health outcomes.

Over the past generation, however, regions of the United States have diverged from one another. State governments began to implement increasingly varied policies in areas such as reproductive rights, labor relations, and the welfare state (Caughey, Xu, and Warshaw 2017; Grumbach 2018). The state level has returned to the center of American policymaking. Whether this transformation is helpful or harmful for political equality and American democracy depends in large part on the mechanisms through which federalism shapes politics.

Federalism and Power Relations

The growing importance of the state level over the past half century does not simply change the venue. It also “divides and conquers,” changing politics by splintering “democratic participation and state accountability in ways that strengthen existing power differentials” (L. Miller 2008, 27). Below, we describe and illustrate four mechanisms through which institutional decentralization advantages powerful elites, disadvantages less powerful groups, and decreases democratic capacity: venue selection, information asymmetry, exit threat, and decentralized accountability (Table 1).

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Venue shifting and mobile political resources

Federalism enables coordinated affluent interests to “venue shop” in search of fertile pastures to implement their agendas (Baumgartner and Jones 2010). Such an environment provides political advantages to moneyed, mobile policy demanders relative to diffuse voters who are rooted in place. Although these are long-standing dynamics within American politics, their relevance to democracy has been amplified by the growing political reach and technological capacity of wealthy groups and the decades-long escalation of economic inequality (Hertel-Fernandez 2019; Saez and Zucman 2016). Today, political groups and activists can shift millions of dollars’ worth of political resources across states in the form of lobbying, campaign contributions, model legislation, and inf ormation. Well-resourced groups with the ability to target and influence the agenda of many state governments controlled by their aligned party can make major policy gains, even while the polarized U.S. Congress stalls (Hertel-Fernandez 2014, 2019). Ordinary voters do not have equivalent options. They are diffuse and immobile, confined to voting within their states for a governor and within their legislative district for state legislative candidates.

A classic literature argued that concentrated and elite interests are advantaged at lower levels of government (e.g., Schattschneider 1960; Riker 1964; McConnell 1966, 139–55), which diffuse and mass interests can counter by “extending conflict” to higher levels (Schattschneider 1960, 63). More recent studies demonstrate that well-heeled organizational networks have increased their investments in state politics with a focus on cross-state agenda setting and advocacy (Hertel-Fernandez 2019). Organizational and technological innovations have allowed these groups to lobby and provide “model bills” to state legislators (Hertel-Fernandez 2014). Further still, superwealthy individuals leverage federalism in myriad ways. For example, through “boundary control” processes, billionaires spend money to secure unified Republican control in states, then assist these new state governments in developing and implementing conservative economic policies that are unpopular with voters (Page, Seawright, and Lacombe 2018). Similar processes unfold at the local level. Elections for school boards, sheriffs, and other local positions are increasingly “nationalized” as outside donors infuse local campaigns with unprecedented resources (Reckhow et al. 2017; Henig, Jacobsen, and Reckhow 2019; Zoorob 2020).

Compared to the expanding horizon of possibilities for elite interests, “the representational capacity of diffuse citizen interests” remains circumscribed (L. Miller 2008, vi). Even as decentralized state and local civic and political organizations are crucial for democracy (Han, McKenna, and Oyakawa 2021), they have a harder time leveraging mobile political resources to shift to optimal venues. Local groups whose main political resource is their membership—their ability to organize people to vote or engage in social movement activity—cannot easily move across states or levels of government. Membership-based housing organizations, for example, hit hard limits as they confront states’ ability to preempt local policy (Stahl 2017). Without the power and resources to venue shift—to either state or national legislatures—these groups’ see hard-fought victories like rent control, eviction moratoria, and tenant protections undone by state legislatures that block local governments from enacting such legislation. Local organizations with minimal resources are blown back by the head winds of federalism as they attempt to translate power built through marginalized communities into lasting policy wins.

A distinct but related dynamic emerges when state laws meant to provide protections or resources are made optional for localities. The Uniform Residential Landlord and Tenant Act (URLTA) is an apt example. URLTA is a sample law created by the National Conference of Commissioners on Uniform State Laws in 1972 as a response to the enormous heterogeneity in the scope and nature of landlord-tenant law across the states (Blumberg and Robbins 2017). Although minimal in many ways, URLTA contains provisions meant to institutionalize very basic standards of treatment for tenants—requiring that landlords provide things like running water, working receptacles, and habitable living conditions (Blumberg and Robbins 2017). Since the sample law was promulgated, twenty-six states have adopted at least some of its provisions. We might consider this a positive example of federalism—the diffusion of this policy benefitted a relatively vulnerable class of people. Yet consider the way that URLTA has unfolded in Kentucky. In 1974, Kentucky adopted legislation modeled closely on the language of URLTA (Johnson 2018). However, subsequent legislative and judicial battles over the law led to an “opt-in” provision enacted in 1984. This provision gave (most) local governments the option to decide whether to apply the law in their jurisdiction (Johnson 2018). There is also a preemptive element of the law that prevents localities from passing any other tenant-related laws (besides URLTA). Together, local opt-in policies and preemption maximize the power of landlords and realtors (who often operate across jurisdictions and have numerous options for opposing URLTA on a local level) while constraining the choices of grassroots groups. One community organizer1 from Kentucky explained their dilemma this way:

We have a state law, the Uniform Residential Landlord Tenant Act . . . so it’s a state law but cities don’t have to adopt it, they can opt into it . . . it’s basically an opportunity for small towns to not have any landlord tenant law. But in addition to that, there is a provision in URLTA that no other laws pertaining to the contents of that law can be passed by municipalities. Which basically—the way that city officials have interpreted that is that they can’t pass anything on landlord tenant law . . . and we have a supermajority in both the state House and Senate of Republicans. And that’s not likely to change anytime soon . . . the prospects for getting something passed at a statewide level are very long odds. And state law prevents us from doing a lot of strong things at the local level that we might be able to win because Lexington’s [at least] a liberal city, and our Council members are responsive when we reach out. Sometimes. Which is more than we can say about the state level. So that’s a real challenge.

In this way, federalism can disproportionately constrain the choices of nonelites, hemming in the few venues they have for exercising political influence.

At the same time, federalism can also multiply options, creating confusion, making it difficult to identify the most effective pathways for change, and narrowing the scope of policy wins. Lisa Miller (2008, 7) argues that the “federalization” of a policy area—the expansion of the number of venues that deal with a policy area—reduces the participation of ordinary people. The numerosity of venues can also diminish the effectiveness of broad based participation—allowing those in power to pass the buck, delaying institutional responses until voter or social movement pressure dies down. Finally, counter to the assumption that proliferating venues provide more opportunities to effect change, the experiences of grassroots organizations suggests the opposite. Victor,2 a tenant organizer from Kansas, demonstrates how navigating multiple venues can complicate the attempts of low-resource groups to organize politically, even when they thoughtfully select venues in politically savvy ways. Victor works with a statewide organization that started in the wake of the pandemic. The primary goals of the group at its origin were (1) an eviction moratorium and (2) rent cancellation. Given those goals, they decided that a state-level focus was most appropriate:

None of the cities or even the counties would have had the financial resources to cancel rent . . . the Governor is the one with the eviction moratorium power. [The Governor] was our target, so we had to be a statewide org . . . now that [the pandemic] is kind of going away, that’s why we’re thinking about this coalition of county groups.

As the pandemic began to wane, Victor’s organization reconsidered its strategy. In part, that decision was also driven by the impossibility of making legislative gains on the state level (e.g., limited options for shifting upwards) and the difficulties posed by a strikingly wide array of city-level venues (e.g., an untenable proliferation of options as they shifted downward). Here is how Victor described it:

So if we can win county wide wins . . . that’s a . . . way to do it without having to build enough power to move the legislature [but] it’s interesting when we think about our [county] strategy because I’m in [X city]3 and if I go two minutes to the east, I’m in [Y city] with a different City Council . . . if I go five minutes to the West there is [Z city] . . . five minutes South I’m in [J city] and five minutes North I’m in [K city] . . . they all have different city councils . . . so we kind of have to target the county to get the benefit of actually having an enforceable policy that applies to all [of these cities].

As Victor’s group attempted to organize, they were inhibited by insufficient resources (political and economic) for influencing the state legislature, on one hand, and stymied by an inadequate scope of impact induced by copious city governments, on the other hand. Given these bounds, the group decided to focus on “building a critical mass of people to move a county Commission,” despite Victor’s admission that counties had relatively small budgets.

It is important to note that while institutional decentralization of venues is disadvantageous for diffuse groups and movements, organizational decentralization is critically important. As Han and Kim argue in this volume, groups representing the disadvantaged are better poised to build capacity and leadership through decentralized, federated organization (see also Skocpol, Ganz, and Munson 2000).

Political venues in the American political system are more numerous and available than ever—but in ways that are imbalanced, unequal, and often biased toward elite economic interests. Unlike earlier eras of state-centric American federalism, the contemporary state resurgence involves more overlapping policy authority across the national, state, and local levels. As Miller argues, “Over the past 50 years, most issues have not simply shifted from one level to another; rather, remnants of activity remain on the levels at which they originated even as issues have migrated across levels” (L. Miller 2007, 307). This bleeding of policy authority across levels makes the mobility of political resources all the more important (L. Miller 2008, 7).

Information asymmetry

When groups seek big policy changes in the states, they face a potentially powerful countervailing force: the electoral connection. Voters should be monitoring their governors and state legislatures, ready to reelect them if they do the right thing, or to throw the bastards out if they don’t. Yet federalism can compromise electoral accountability in ways that insulate elite political actors from democratic accountability.

Many studies suggest that state and national policy-makers will be responsive to the attitudes of the general electorate’s median voter to maximize their chances of reelection (Bartels 1991; Canes-Wrone, Brady, and Cogan 2002; Caughey and Warshaw 2018; Erikson, Wright, and McIver 1993; Lax and Phillips 2009; W. Miller and Stokes 1963; Page and Shapiro 1983). Beyond these studies, there is a long-standing mythos that localism enhances democratic responsiveness by allowing for policy customization and bringing constituents “closer” to their representatives in the states.

Despite both the mythos and the empirical studies showing a strong correlation between public opinion and state policy, the “theoretical advantages offered by federalism are too often stifled by the complex realities of multilevel governance” (Simeon 2006, 42). For the most part, public opinion has not played much of a role in recent policymaking in the states. There are some important exceptions—where voters and social movements put up a strong fight to hold politicians accountable for “out-of-step” policy—such as opposition to Wisconsin Governor Scott Walker’s efforts to curb the power of labor unions, or to the “Kansas experiment” of high-end tax cuts by Governor Sam Brownback. But even in these examples, Walker survived a recall election against him and was reelected to a second gubernatorial term in 2014; Brownback, in his second term, was appointed U.S. Ambassador-at-Large for International Religious Freedom by the Trump White House.

This is because it is especially difficult for voters to hold politicians accountable at lower levels. Some studies suggest that the electoral connection is weaker at the state level than the national level because voters pay little attention to state politics (Anzia 2011; Hopkins 2018). In general, voters may select politicians not on the basis of policy positions, but on the basis of identity—especially party identification derived via socialization into a party “team” (Green, Palmquist, and Schickler 2002). Indeed, party ID appears to be strengthening as it increasingly overlaps with racial, religious, and other salient social identity cleavages (Schickler 2016; Mason 2018). Voters increasingly see politics as a national battleground between these partisan “teams,” and are unlikely to split their tickets by voting for one party at the state level and one at the national level. It is thus no surprise that state legislative elections are dominated by national forces, with parties’ success in the states closely tied to their success in national offices (Rogers 2016). As Hopkins (2018, 13) argues, “Americans today are primarily engaged with national and above all presidential politics,” taking cues on how to feel about state and local politics from the national level.

For voters to hold politicians accountable for their policy choices, public policy must be “traceable” (Arnold 1992)—the connection between policies and social outcomes must be clear. However, the precipitous decline of state politics journalism has made policy even less traceable for voters. Pew reported a staggering 35 percent decline in the number of full-time newspaper reporters covering state politics, policy, and administration just between the years 2003 and 2014 (Enda, Masta, and Boyles 2014). As the state level staff for major papers like the Pittsburgh Post-Gazette and the Charlotte Observer, the ratio of state politics reporters to Americans grew to about 400,000 to 1 (Wilson 2014). As the number of state politics reporters declined, so did coverage of the reams of legislation coming out of state legislatures. This decline in newspaper coverage of state politics has not been offset by increased TV coverage or online state politics reporting. Local TV news, which increases voter knowledge of home state politicians (Moskowitz 2021), has been on the decline. Even the local TV news surviving the industry decline has become increasingly focused on national politics (and more ideologically conservative)—the result of media conglomerates like Sinclair Broadcast Group buying up local stations (Martin and McCrain 2019).

Correspondingly, recent empirical research finds evidence of a fractured relationship between constituent and state politicians’ policy positions. State legislators systematically overestimate the conservatism of their districts on policy questions (Broockman and Skovron 2018). Moreover, “out-of-step” legislative votes rarely lead to electoral punishment for state legislators (Rogers 2017). Altogether, there is strong evidence demonstrating how federalism’s “intricate processes of multilevel governance pose immense challenges for citizens seeking accountability, clarity, responsiveness, and transparency” (Simeon 2006).

Information asymmetry also puts a significant burden on local membership-based organizations with limited resources. To mobilize members and equip them for action, such groups expend precious time and energy attempting to bridge information asymmetries. For example, during tenant union meetings systematically observed by one of the authors, organizers spent substantial time explaining the nuances of eviction moratoria policies across levels of government. During a meeting of a tenant union in a midsized California city, organizers explained that the city had the strongest moratorium: extending the longest, applying the harshest sanctions to landlords, and devoting the most resources to enforcement. But the county and state also had eviction moratoria. Some of the provisions across the ordinances were conflicting, and many tenants were confused about precisely what protections they had. To address this, the tenant union ceded more than half the meeting time to a housing attorney who went through a detailed PowerPoint explaining the differences and implications of policy at each level of government. The other topics covered in the union meeting included how to build the union’s base and how to grow its power, but much less time was left for discussing those matters given the time needed to sort through the confusing nuances of eviction moratoria across cities, counties, and states.

The exit threat

The threat of exit provides groups, especially those who control economic capital, expansive structural power (Lindblom 1982). The strategy is relatively simple: firms and financiers threaten to pull their investments and business activity from a jurisdiction unless they receive policy concessions. Often this threat is implicit. CEOs, shareholders, and wealthy taxpayers do not even have to utter a word for politicians to be afraid of what might happen if they became angry enough to leave. But they often do: “If our efforts [at stopping Assembly Bill 5] are not successful, it would force us to suspend operations in California,” threatened Lyft CEO John Zimmer in 2020.

Democratic equality, where everyone has a reasonably equal voice to use to influence politics (most prominently in the “one person, one vote” standard), is an important standard. The trouble with the threat of exit is that, unlike the vote, not everyone has it equally. Thus, when Lyft and Uber threaten to exit California, they are using a political tool that ordinary people do not have. The California public had exercised influence over the law by electing the representatives who passed Assembly Bill 5, but Lyft and Uber had the additional tool of a capital strike (see, e.g., Young, Banerjee, and Schwartz 2018).

To be sure, business interests have a complicated relationship with federalism. Businesses exploit their structural power and the threat of exit. Still, “large businesses that cross state lines have a competing interest in passing tax and regulatory legislation through Congress instead of each and every state, as managers would much rather deal with one single set of rules about doing business than fifty different ones” (Hertel-Fernandez 2019, 248). Nonetheless, increased coordination of a conservative and business coalition helped firms to navigate this trade-off. American Legislative Exchange Council (ALEC), Americans for Prosperity, and other organizations helped to create consistent, business-friendly tax and regulatory regimes across many states, while simultaneously keeping policy authority at the state level to maintain the threat of exit as a political weapon (Hertel-Fernandez 2019).

On the other end of the organizational spectrum, grassroots membership-based groups that build power in economically and racially marginalized communities do not have the option of moving to locales where their efforts will yield the greatest return on investment. By virtue of their structure and purpose, such organizations are rooted in specific communities. This makes them “closest” to the people in the way that the mythos of localism often upholds as key to democracy but also forecloses their exit options, limiting their menu of responses to state and local political barriers. Even if such groups had the choice to leave, state governments would have little incentive to woo them with political concessions because they do not infuse state and local economies with capital that political elites ardently covet.

Decentralized accountability

It is not just that federalism is an advantageous system for concentrated and antidemocratic interests. Across the board, federalism weakens politicians’ incentives to perform well and to respond equitably to their constituents. The multiplicity of overlapping political authorities makes it difficult to know which politicians to reward or punish for their performance. With little response from the Trump administration, the COVID-19 crisis provided a test case for whether Democratic state governments could marshal effective pandemic responses on their own.

In the early days of the pandemic, supporters of federalism celebrated state governments’ leadership in the face of inaction from the feds. “Governors Leapfrog Feds on Coronavirus Response” read a report from the Pew Research Center (Povich 2020). And for a brief moment in the late spring of 2020, Andrew Cuomo, in particular, appeared to be America’s savior. Cuomo’s approval rating shot up to 77 percent in late April. As political scientist Kathleen Hall Jamieson suggested, “A person from Mars observing the rhetoric and actions of our leaders would reasonably assume that Andrew Cuomo is the president” (quoted in Povich 2020). But lurking underneath the performative gravitas of Cuomo’s popular press conferences was the uncomfortable fact that New York State was not doing well. COVID-19 was wreaking havoc in New York City and throughout the state, most markedly ravaging Black and Latinx communities. About thirty thousand New Yorkers had lost their lives to COVID-19 by June, more deaths than all but four countries on earth. It’s reasonable to say that for much of 2020, New York was not only the American epicenter, but the world’s pandemic epicenter.

Some of the suffering was due to Cuomo’s own mismanagement. The governor was slow to issue a lockdown order for his state. He cut public services, including public health through the state’s Medicaid program. Cuomo’s executive order on nursing homes expanded the pandemic’s damage. As late as July 2020, waits for COVID-19 test results were at least a week long, and contact tracing never quite got off the ground. A longtime opponent of criminal legal reform, Cuomo presided over a spreading epidemic in the state’s carceral system and resisted clemency cases. The notorious Rikers Island jail complex, where 16-year-old Kalief Browder had spent years in solitary confinement awaiting charges for theft, became the “epicenter of the epicenter.”

So why was Cuomo so beloved despite these failures of governance? At least some of this disconnect stems from federalism, the multilevel constitutional structure that gives authority to both the national and state governments. Cuomo was able to deflect blame because federalism decentralizes accountability. This is not to say that his characterization of the federal government’s response as calamitous was inaccurate. But Cuomo’s ability to point to another level of government in a federal system shielded him from political accountability. It is hard to know how to distribute blame among the many executives and legislators in your local, state, and national government. When everybody is responsible, nobody is responsible.

Federalism also tied the hands of Cuomo and the state government of New York. Despite its wealth as a state, New York not only lacked the fiscal and monetary capacity to provide economic aid at an adequate scale, but its constitutional balanced budget requirement forced it to make cuts to safety net programs (including Medicaid—again, during a pandemic; see Rocco, Béland, and Waddan 2020). The state also faced the negative spillovers from other states’ weak pandemic responses. Crowds of spring breakers reveling in unregulated Florida, where the Republican governor Ron DeSantis resisted implementing preventative measures, soon traveled back north. The control that federalism supposedly granted New York and other state governments over the pandemic response was in part illusory.

Finally, in a pattern we have demonstrated again and again, the shortcomings of federalism do not have equitable ramifications. The COVID death rates for Black New Yorkers were among the highest Black death rates in the country and nearly triple the national average (COVID Tracking Project). As federalism facilitated the smoke and mirrors that obscured Governor Cuomo’s accountability for outcomes in New York State, the most pointed repercussions reverberated through communities of color.

Federalism and Democratic Erosion

Considered together, the four mechanisms outlined above highlight the often-corrosive effects of federalism on democracy. By creating and exacerbating institutional pathways for political inequality, federalism can compromise a core aspiration of democracy: equal voice. The above descriptions of inequality in venue selection, information asymmetry, unequal exit threat, and decentralized accountability concretizes our understanding of how this can happen. Yet this article only touches the surface. There is still much to learn about the relationship between federalism and democracy. How do the four mechanisms we point to interact? How do their dynamics change over time? What are their differential implications across key categories of difference that shape American politics (race, class, gender)? Perhaps most crucial for this volume, what are their implications in contexts of democratic backsliding or movement toward authoritarianism? We entreat scholars to take up these and other questions. We offer a springboard for doing so, positioning federalism as a critical institution structuring key conditions of democratic inequality.