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by John D. Donahue (Basic Books, 1997) Reviewed by Frank Conte |
from NewsLink, Vol. 1, No. 4, Summer 1997
As John Donahue observes in the preface to his new book, Disunited States, some writers on the topic of public policy capitalize "Federal" but not "state." Others, perhaps in a nod to the now-diminished Republican Revolution of 1994, prefer to capitalize "State" but not "federal," wishing the latter would fade away.
An associate professor of public policy at Harvard University's JFK School of Government, Donahue takes a diplomatic path, choosing to spell both terms in lower case. In doing so, he appears to favor a respectful balance in our democratic republican form of government.
However, Donahue's Hamiltonian bias for a strong central government betrays his stylistic preference. In short, Donahue thinks the nation is plunging in the wrong direction by shifting responsibilities to the states.
Donahue thinks that devolution warrants more attention than the federal deficit, suggesting that such downshifting "will prove to be a detour, a disappointment, or a misstep toward engaging... fundamental problems." Few people, save the usual suspects, have thus far accepted Donahue's thesis.
Proponents of state policy innovation will find much to disagree with in Disunited States. But this work has redeeming value. In fact Donahue has produced a remarkably useful work that challenges the principle of state primacy that is ascendant not only among Republican theorists, but also among Clinton's New Democrats.
But Donahue declares that shifting government downward isn't likely to save much money. The cost of government would decrease only slightly. Moreover, the proponents of devolution overlook the fact that state and local government employment grew by 150 percent between 1962 and 1995 while federal employment grew by only 15 percent. Spending made possible by state and local governments' own source revenue now consumes 10 percent of America's GDP. And while voters like their governments close to the vest and trust their superstar governors more than Congress, their preference isn't overwhelming enough to justify historic shifts in economic or social policy. In this context, devolution has the potential to make matters worse, says Donahue.
Donahue's roster of the shortcomings of devolution chic is lengthy even though it is not always convincing. He anticipates that interstate competition for international capital will rupture state treasuries. He foresees that state-based welfare reform will fail during recessions; this failure will unleash an unnecessary harshness on the poor as legislators with block-grant power will favor highways over the poor. Finally, Donahue warns that the honest graft of K-Street lobbying will subdivide remarkably under 50 state-house domes.
Donahue believes tax incentives and economic warfare between the states place them in the paradox of industrial policy. States will more readily commit the "Type II mistake" of pushing public money where private money would willingly go. Reviewing "nine deals that changed the American auto industry," Donahue poses the hard questions about the interstate chase for the vanishing smokestack industry and its high-paying manufacturing jobs, the Holy Grail of a changing economy. Is the $168,000 per job in public resources spent by the state of Alabama to lure Daimler-Benz worth it? All things considered, Donahue thinks the value of tax incentives is still open to debate.
But Donahue's answer to the endless argument is troubling. In spite of the budding success of the welfare reform act of 1996, he wants federal primacy in antipoverty policy restored. Because of interstate tax competition, which limits their ability to raise taxes, states will not be able to handle the lifelong learning Americans need to adapt to a changing work world. He thinks the federal government should enlarge its role in higher education. And to secure some equity between the states, Donahue revisits the hoary days of revenue sharing, calling for a "subnational tax policy [that is] closely coordinated and fiscal competition [that is] tightly circumscribed."
To some extent these inelegant solutions have been tried before. But Donahue's prescription for curbing the state courtship of capital and the attendant competition treads upon uncharted legal and economic waters. "The best approach," writes Donahue, "would be through national legislation that alters states' incentives to offer...inducements or companies' incentives to accept them." Donahue is not alone. A growing counterpoint to devolution - the use of the "Commerce Clause" to prod Congress into limiting interstate competition - is gaining intellectual respectability. Just as the devolutionists have affixed in the public mind the image of Senator Robert Dole brandishing a copy of the Tenth Amendment, the anti-devolutionists seem poised to pull the Commerce Clause out of their pockets to invalidate 50 separate tax policies in the name of the national interest.
Conservatives should welcome some aspects of Donahue's critique. He concludes, "Devolution is likely to prove less satisfying than many expect. Since it has been justified in terms of improving, not shrinking, government, the ascendancy of the states represents no conclusion to the debate over the public sector's proper size and scope."
And, as many students of intergovernmental relations know, state governments cannot solve some problems any better than the federal government. In fact, some problems - such as job training - may be solved by privatization and vouchers, providing what Donahue calls "a far richer menu of reform possibilities" than devolution. In addition, devolution doesn't let the federal government off the hook; true spending reform means getting a handle on Social Security and Medicare.
As a nation, we engage in this "endless argument" because the national government has failed in many aspects that relate to our lives. Given the reach of the federal Leviathan, citizen preference for state government should come as no surprise. In contrast to Donahue's view, there is much to be said for competitive federalism and for the dynamic system that allows people as consumers of public services to "vote with their feet." This exit option - even though not exercised by all - continues to be a safeguard of liberty in a federalist system.(1)
Beyond the idea of "laboratories of democracy," people feel more empowered at the state level. It is there where people can appraise service delivery and it is there - whether through ballot initiatives, referenda, or home rule petitions - that citizens can make a difference to a degree that is nearly impossible in Washington.
(1)For a thorough defense of competitive federalism, see James M. Buchanan, "Federalism and Individual Sovereignty," Cato Journal Vol. 15, Nos. 2-3 (Fall/Winter 1995/96).
NewsLink is the quarterly newsletter of the Beacon Hill Institute for Public Policy Research at Suffolk University. © 1996-2003. All rights reserved.
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