“It is the lives of the minority poor isolated in our central cities that haunt the ending of this otherwise happy tale” (Paul Peterson, The Price of Federalism, 195): On Federalism.
BOOK REVIEW: Paul Peterson’s book, The Price of Federalism, endeavored to explain the intergovernmental relations within the American political system. To do so, Peterson relied heavily on statistical analysis and the legislative and functional theories of federalism. The book showcased 18 tables and 27 figures. These tables and figures were often used to elucidate a particular theory or function of federalism. Generally, the statistical information captured two or more points of time regarding an issue in order to demonstrate the changing federal system. He focused on the States and their varying policies, especially the States’ welfare policy, and what that may mean for American citizens. Finally, Peterson explored the issue of equity, urban dilemmas, and how the evolution of federalism might responsibly continue.
The book began with an historical account of early federalism. Peterson explained that the Founders designed the constitution so that the national government would be able to protect the country from external tyranny while the “state governments, by denying power to any single dictator, reduce threats to liberty from within” (6). Peterson specifically referenced James Madison and historical accounts to illustrate this point, such as the election of 1800. Here, federalism is a system to protect the people and their sacred liberty—within the union. This doesn’t change.
Some of the paramount changes in federalism occurred during the presidency of Franklin Roosevelt. Peterson noted Justice Sutherland’s depiction of federalism in the “sick chicken” case, “The relation of employer and employee is a local relation…over which the federal government has no legislative control” (11). However, President Roosevelt threatened to pack the Court, so that the Supreme Court decisions would reflect his legislative policy. Consequently, the Court indeed changed their opinions so that it supported New Deal policy. Of salient importance was that “the Supreme Court ruled that Congress could attach any reasonable conditions to its grants to the states” (13). This was the birth of contemporary federalism. The remainder of the book chronicles how grants from the federal government impact a state and/or a local government and intergovernmental relations post new deal.
Peterson created two theories of federalism so that the reader may clearly understand intergovernmental relations. They were the legislative theory and the functional theory. The former presupposed that the priority of elected officials is to get reelected. Thus, federalism, through grants and aid, is in reality an incentive system to get reelected—to achieve the goals that the political candidates told the voters during the campaign and while in office. The latter described the functions of federalism—the redistributive and developmental aspects of grants and aid. Further, “functional theory is optimistic about the future of American federalism… each level of government… concentrate on those [functional] activities… the system is capable of self-correction… legislative theory is much less optimistic…political incentives that shape the decisions of policy makers induce them to make the wrong decisions” (39). In general, functional theory described the how factor, while legislative theory described the why factor.
Federalism sprawled post New Deal. Presidents created programs and slogans that increased grants and aid to states and localities, such as the war on poverty, guaranteed education, fair housing / urban development and transportation. As the federal budget increased through bracket creep, the national government enacted laws to compensate for their programs and slogans. Some of the major legislation included: General Revenue Sharing Act of 1972, Community Development Block Grant Act of 1974, and the Comprehensive Employment Training Act of 1974. However, federalism was designed so that the state and local governments also tax their citizenry for expenditure purposes, and so equity may be elusive to poorer states and poorer localities, particularly within blighted urban cities.
Peterson argued that the functional theory of federalism may correctly distribute national dollars for equity purposes, yet the legislative theory of federalism revealed that the elected officials quickly redistributed the fiscal resources for reelection purposes; meaning, equity continued to elude the poor. Some of the factors explored in The Price of Federalism dealing with equity include: distribution of federal grants, state and local tax revenue, poverty, population density, and presidential effects. The author also explored the problems and possible solutions within big cities, such as the differences between Rust Belt and Sun Belt cities. He was careful to show the complexity of taxing, schooling, and state assistance. In the end, “Big cities must turn increasingly to their own resources…because of shifting ideological opinion about the appropriate role of government” (174).
Critique of the Arguments
Peterson’s two theories of federalism were constantly embedded within the book. This helped the reader understand how the functional and legislative theories explained federalism. However, it also kept the reader wondering about other explanations of federalism and aspects of federalism that the two theories would not explain. For example, U.S. congressmen often encounter numerous political and legal obstacles when attempting to represent their constituents. Also, many of the grants and federal programs today rely on state and local officials to administer the programs, and there is always some form of resistance from the latter parties. Certainly, one major limitation for Peterson is that he must generalize the thousands of governments within the American federal system.
Peterson incorporated a case study of welfare. He attempted to explain that increased welfare benefits by the states will induce recipients to move to states with high welfare benefits. Here, states have control over the welfare policy and statistical evidence is provided for the “Race to the Bottom,” meaning, states will not elevate their welfare benefits because that would entice welfare recipients to move to their state. Thus, states must keep the welfare status quo or decrease benefits so that recipients will move to another state with more benefits. However, he assumed that the poor know this information, have a desire to move (away from family) for fiscal purposes and have the transportation and will to actually move. He argued that a national welfare policy might evaporate the “Race to the Bottom,” but he does not inform the reader of the political and legal problems that this shift might cause. Further, the statistical evidence seemed weak, indeed, because he does not analyze why states with higher welfare benefits are often wealthy states.
The Price of Federalism ignored many of the descriptions regarding federalism found in other modern books. For example, Peterson did not view federalism as bamboo fence federalism or picket fence federalism. He was often silent on state mandates, political coalitions, tax coordination, the shape, size and form of local governments, state legislators, politics in general, interest groups, Dillon’s rule, home rule, and non-profit organizations, to name a few. However, it was refreshing to imagine federalism through the lens of the functional and legislative theories.
Overall, The Price of Federalism was based on statistical analysis and the functional and legislative theories enable the reader to grasp a macro view of federalism. There were no substantial case studies of these theories’ impact on local or state governments, yet there was not much redundancy or useless information in the book. The book flowed evenly from one chapter to the next and many of the examples used to describe his points of contention were informative and understandable. Of course, a book based on statistical analysis may clarify the reality of the topic, but one should remember the prudent words of Disraeli, “There are three kinds of lies: lies, damned lies, and statistics.”
How much is federalism to blame, in reality, for suburban success? Or on the other hand, for the blight and fright in our cities?