Restoring Federalism and State Sovereignty: A Constitutional Path to Prosperity
The 10th Amendment in the Era of Due Process
The Tenth Amendment to the Constitution provides: “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.”
Over the first century of our nation’s history the 10th Amendment was an important part of the Constitutional rules constraining the growth of the federal government. This was the era of due process when the courts challenged incursions by the federal government on the powers reserved to the states and the people. Economic liberties, protected under the 5th and 14th Amendments, were subject to the same standard of judicial review and protection as personal liberties.
This era of due process was reflected in our fiscal policies. At the end of the 19th century all government spending was less than 10 percent of total output. Federal taxes and spending were less than total combined state and local taxes and spending. The federal debt was about the same level at the end of the century as at the beginning. The role for the federal government in the economy was not that much different than it was at the founding of the Republic.
The 10th Amendment in the Era of Judicial Abdication
It is fair to say that today the 10th Amendment has become meaningless as a constraint on the power exercised by the federal government. The purpose of this paper is to examine this erosion of the 10th Amendment, and how we can restore federalism and state sovereignty.
Over the past century the 10th Amendment and other Constitutional constraints on the growth of the federal government have been eroded to the point that they are almost meaningless. This era of judicial abdication was launched during the Great Depression when the Supreme Court reinterpreted the Constitution to subject economic liberties to a lower standard of judicial review than personal liberties. The courts have since sanctioned a greatly expanded role for the federal government to tax, spend, and regulate economic activity.
Unconstrained Growth in Federal Spending is Eroding the Federalist System and State Sovereignty
The era of judicial abdication has been accompanied by unconstrained growth in federal taxes and spending, culminating with unprecedented growth in federal spending under the Obama Administration. This week the Congressional Budget Office (CBO) projected that federal spending will average in excess of 24 percent of total output over the next decade, far above the average over the past century. Federal deficits will increase to 5.6 percent of output by the end of the decade. The federal debt will increase to $20.3 trillion, double the level of debt at the beginning of this administration.
The rapid growth in federal spending is eroding fiscal discipline at the state and local level. Federal stimulus dollars are funding higher levels of state spending in the short run. When these one-time moneys disappear state budgets will fall off a cliff; states will have to increase taxes or cut spending.
Unconstrained growth in the federal government also is undermining our federalist system. In return for federal stimulus dollars the states have abdicated their role in administering these funds. The federal government essentially has commandeered the taxing, spending, and regulatory powers of the states. Increased federal funding for welfare, Medicaid, and other federal programs will be accompanied by increased federal control over how those dollars are spent. Many of the successful welfare and Medicaid reforms that the states have enacted will be negated by federal rules and regulations.
It is fair to say that the nation has reached a tipping point in the expansion of the federal government and erosion of our federalist system. The CBO projects that unconstrained growth in federal spending is not sustainable. It does not matter how the federal government attempts to finance the growing deficits and debt. The result will be retardation and stagnation in economic growth. Tax revenues would have to double to finance the deficits. If the deficits are financed through borrowing, interest rates would have to increase to levels that crowd out private investment. Printing money to finance the deficits would result in crippling rates of inflation. The CBO concludes that there is only one way to reform our fiscal policies and sustain our economic growth, and that is to reduce the rate of growth in federal spending.
Ineffective Constraints on the Growth in Federal Spending
Unfortunately Congress has not had much success in constraining the growth in federal spending under either Republican or Democratic administrations. Over the years Congress has imposed a variety of budgetary rules that have had temporary, but no lasting effects in limiting spending. The current rule, known as “paygo,” lends the appearance of prudent fiscal policy, but is largely ignored.
Nor have the states had much success in constraining this growth in the federal government and erosion of our federalist system. Thirty-eight states, including Colorado, have introduced resolutions to reaffirm the principle of delegated powers under the Constitution. These resolutions recognize that many federal mandates are in direct violation of the Tenth Amendment. A resolution introduced in New Jersey goes further, noting that in New York v. United States, the United States Supreme Court ruled that Congress may not simply commandeer the legislative and regulatory processes of the state. The New Jersey resolution claims sovereignty under the Tenth Amendment over all powers not otherwise enumerated and granted by the Constitution to the Federal government, and serves as notice and demand to the federal government to cease and desist mandates that are beyond the scope of its Constitutionally-delegated powers.
These non-binding “state sovereignty resolutions” do not carry the force of law, but are statements of intent by state legislatures. Even though the courts have provided some support for the resolutions, the states have not been successful in using the 10th Amendment to challenge the broad range of powers now wielded by the federal government. Indeed, some refer to the resolutions as feel-good measures because they do little to constrain the federal government.
One way that the states have attempted to fulfill the legislative intent of the resolutions is through nullification. A state nullifies a federal law when it proclaims the law in question is void and inoperative, or non-effective, within the boundaries of the state. Enacted by the states from the early years of the Republic, nullification laws have challenged a wide range of federal laws from the Alien and Sedition Acts, to federal taxes.
A modern nullification movement has challenged new federal laws perceived to be in conflict with the Constitution and state laws. Thirteen states have enacted medical marijuana laws that contravene federal laws which declare marijuana to be illegal. Twenty states have enacted legislation to prevent the implementation of the federal Real ID Act of 2005. Two states have passed laws nullifying federal gun laws and regulations within their states.
When states pass nullification laws they simply refuse to enforce the federal laws perceived to be in conflict with the Tenth Amendment and state law. In some cases the response of Congress and the President has been to stop implementing and enforcing the federal law. The Obama administration has stated it would no longer prioritize enforcement against those acting in compliance with state medical marijuana laws. They also have stated that they propose to repeal and replace the controversial Real ID Act. However, these nullification laws are challenged in the courts, where they founder on preemption of federal law over state law.
A Constitutional Path to Prosperity
Citizens also have been unsuccessful in constraining the growth of federal spending. Over the past century citizens have made a number of attempts to incorporate fiscal rules in the U.S. Constitution. Article V provides two routes to amending the Constitution. Congress, with a two-thirds vote, can place a proposed amendment on the ballot, at which point the proposed amendment must be ratified in three-fourths of the states. Or, with two-thirds of state legislatures concurring, the states can request Congress to convene a constitutional convention for the purpose of amending the Constitution.
Thus far, only the first route to amending the Constitution has been successful. Citizens have not been successful in garnering the requisite two-thirds of state legislature required to propose a constitutional convention. The proposed amendments include measures to repeal the income tax, prohibit federal unfunded mandates, and to balance the federal budget. The recent effort to call a constitutional convention to balance the federal budget was effectively blocked by interest groups who argued that the result would be a runaway convention.
Given previous failed efforts to incorporate fiscal rules in the Constitution some would argue that we can only hope to elect a better group of legislators committed to fiscal discipline. This approach would seem to be a counsel of despair. The folly of relying on Congress to impose fiscal discipline is revealed by the record of fiscal profligacy under both Republican and Democratic administrations.
We can’t afford to wait while federal fiscal policies bring retardation in economic growth and undermine the federalist system. There is a growing recognition that unconstrained growth in government spending can lead to a tipping point and a failed state. The precedent for such failure is emerging in California. The California legislature recognizes that its fiscal policies are not sustainable, but lawmakers do not seem to be able to change course. The growing reliance of states, such as California, on federal bailouts is eroding what little fiscal discipline is left.
There also is a growing recognition in Congress that the failed fiscal policies are not sustainable. In his “Roadmap for America,” Congressman Paul Ryan (R-WI) makes the case for incorporating new fiscal rules in the Constitution. The Republican Study Committee has endorsed the “Roadmap” and drafted new legislation to amend the Constitution. House Joint Resolution 1 proposes a Balanced Budget Amendment. House Joint resolution 79 proposes a spending limit equal to one-fifth of total output.
The states are not waiting for Congress to enact this legislation. State legislators are proposing their own amendments to incorporate fiscal rules in the U.S. Constitution. In Florida Senate President Jeffrey Atwater has introduced a bill calling for a statewide referendum on a federal balanced budget amendment. He and his colleagues also have introduced a Senate Concurrent Resolution calling for a convention to amend the U.S. Constitution. These amendments propose to do the following:
The American Legislative Exchange Council (ALEC) has endorsed a number of proposed amendments incorporating fiscal rules in the U.S. Constitution. ALEC has formed a working group on federalism and state sovereignty to draft new resolutions and model legislation. These measures include similar amendments to do as follows:
There is a better way to constrain the federal government than capping federal spending at 20 percent of total output. ALEC proposes to limit the annual growth in federal spending to the sum of inflation and population growth. There are several reasons why this type of spending limit is preferred.
First, there is not agreement among economists regarding the optimum size of government. For example, CATO Institute president Bill Niskanen, President of the, argues that the size of the federal government should be about half the current size, which would put federal spending as a share of output well below 20 percent.
While there may not be agreement among economists regarding the optimum size of the federal government, there is a large body of evidence showing that current and projected federal spending is well above the levels that will maximize economic growth.
A cap on the growth of federal spending at the sum of inflation and population growth will reduce the rate of spending growth. By the end of this decade, it would eliminate deficits and balance the federal budget, while additional revenue would be used to reduce the national debt. Economic growth would be maximized, with output growing more quickly than the national debt. The nation would return to the long-run sustainable rate of economic growth achieved for the last two centuries.
Such a cap on the growth federal spending growth equal to inflation would reduce federal spending as a share of output, possibly below 20 percent. Congress would have to learn to live with a hard budget constraint–something they have failed to do in the past–and would have to prioritize spending on all federal programs, including entitlements. This reality would force Congress to rethink the proper role of the federal government in the economy. It would provide an opportunity to identify programs consistent with the powers enumerated in the Constitution, and an opportunity to restore the federalist system envisioned in the 10th Amendment.
There is a growing consensus that we must incorporate new fiscal rules in the Constitution to constrain the growth in federal spending. However, it is not clear what those rules will be, or how to go about amending the Constitution. A number of different fiscal rules have been proposed as amendments, including: balancing the federal budget, limiting federal taxes and spending, and prohibiting federal unfunded mandates. It is not clear whether these initiatives will be proposed as separate, stand-alone amendments or as an omnibus amendment.
It is possible that Congress will ultimately reach the two-thirds vote required to place the proposed amendments on the ballot. Yet a more likely scenario is one in which two-thirds of the states vote to call for a constitutional convention. There is still concern that a runaway convention could result. However, some proposed amendments, such as the Florida legislation, include safeguards to prevent a runaway convention.
Former U.S. Attorney General Edwin Meese has proposed a third route to amending the U.S. Constitution. Under his proposal, a uniformly worded amendment would first have to be enacted through a constitutional convention under Article V. That action would set the stage for state legislatures to propose uniformly worded amendments, such as the fiscal measures already discussed, and place them directly on the ballot.
Whichever approach is taken, the task of amending the Constitution is essential. Now, more than ever, keeping America on a path of economic prosperity will require constraining the growth of the federal government, and restoring our federalist system.