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Reagan and the States
By Richard P. Nathan, Fred C. Doolittle
PRINCETON UNIVERSITY PRESSCopyright © 1987 Princeton University Press
All rights reserved.
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Woodrow Wilson said in 1908 that "the question of the relation of the states to the federal government is the cardinal question of our constitutional system." It cannot be settled, said Wilson, "by one generation, because it is a question of growth, and every new successive stage of our political and economic development, gives it a new aspect, makes it a new question." The focus of this book is on the way in which this central debate in federalism was reopened during the first term of the Reagan administration, a period in which basic changes were occurring in the mood of the country and the attitude of the public on the role of the government in domestic affairs.
The analysis presented in this volume is based on research begun in 1981 when it became evident that Ronald Reagan's new administration was likely to achieve significant cuts and changes in federal grants-in-aid. A network of field researchers was established to study a sample of state and local governments in order to assess the resulting changes in their policies, operations, and roles as the effects of the Reagan changes were felt. Two books and several other publications have been produced based on this research. This book, which presents the main findings of this research, is based on these earlier publications plus fourteen state-focused case studies summarizing the effects of cuts and changes made in federal grant-in-aid programs during the first term of the Reagan administration. The fourteen states in the sample are listed below:
Massachusetts South Dakota
The sample was chosen to be representative in terms of size, location, and economic and social characteristics. This volume includes nine individual case-study chapters written by the researchers who conducted the field research and six chapters of general analysis drawing on the findings of the case studies.
In both the study and in this book, we have tried to do two things. First, we have looked at budget cuts and other changes in federal grant-in-aid programs and how state and local governments responded to them. Much of the business of the federal government in domestic affairs is transacted in the form of grants-in-aid. Reagan's policies in this area, in effect, have two aspects. His efforts to cut spending under federal grants-in-aid (an area in which budget cuts have been concentrated under Reagan) reflect the administration's retrenchment objective. Also under grants-in-aid, Reagan has proposed changes reflecting his federalism reform objective of devolving power and responsibility from the federal government to state governments.
Reagan's biggest successes in pursuing both types of changes under federal grant-in-aid programs — retrenchment and devolution — came in 1981. The cuts made in grants-in-aid in Reagan's first year in office were historic. This was the first time in over thirty years that there had been an actual-dollar decline in federal aid to state and local governments. The cuts produced a 7 percent reduction for fiscal year 1982 in overall federal grants-in-aid to state and local governments as shown in table 1.1. This amounted to a 12 percent decline in real terms. The same legislation which contained these cuts, the Omnibus Budget Reconciliation Act of 1981, also included major changes in the structure of federal aid programs to create block grants that assigned a greater role to state governments.
In addition to describing and analyzing the effects of Reagan's cuts and changes in federal grants, our second objective in this book is to assess how changes in the domestic policies of the national government made during President Reagan's first term have affected the roles and relationships of the three levels of government in our federal system: national, state, and local. Although this subject was largely neglected in 1981 in the debate about the merits of eliminating or trimming particular programs and cutting taxes, we believe the policies of the Reagan administration in the domestic public sector have contributed to a fundamental shift in the balance of power and responsibility in American federalism. This shift involves the enhancement of the role of state governments vis-à-vis both the national government and local governments.
The purposes of the overview chapters in this volume are to describe the Reagan program, its roots and significance; to summarize the responses made by the sample state governments to the Reagan changes; and to analyze the reasons for the differences in these responses both on a program-by-program and a state-by-state basis. We begin by examining the theory of federalism advanced by the Reagan administration and its relationship to other objectives which the administration has pursued in the field of domestic policy.
Reagan's Theory of Federalism
President Reagan's domestic policy initiatives during his first term reflect a theory of federalism grounded in the Tenth Amendment to the Constitution which reserves to the states or to the people all powers not delegated to the national government. One of Reagan's major goals throughout his public career has been devolution to the states, that is to curtail the role of the federal government in domestic affairs and enlarge the role and responsibilities of state governments. As governor of California he argued strongly for such a shift. When he was running for the Republican presidential nomination in 1976, he delivered a speech calling for a "systematic transfer of authority and resources to the states." This set of proposals, affecting $90 billion in federal programs, evoked widespread criticism because of the inability of Reagan and his advisers to spell out the details and explain its consequences. But the proposals did accurately reflect the candidate's basic position.
These views had not changed by 1980 when Reagan was elected president. In his inaugural address in 1981, he promised to curb federal powers and to "demand recognition of the distinction" between federal powers and "those reserved to the states." News accounts at the time said that Reagan's comments on federalism brought a cheer from the section where the governors were seated at the inaugural.
Thirty days after his inauguration as president, Ronald Reagan told a group of governors at the White House that it "is a long-time dream of mine, this thing of balancing up the divisions of government." A few months later, he told state legislators that the federal system is like a masonry wall, and that what is needed is "a proper mix" of the bricks (i.e., the states) and the mortar (i.e., the federal government). "Unfortunately," according to the president, "over the years, many people have come to believe that Washington is the whole wall — a wall that, incidentally, leans, sags, and bulges under its own weight."
Reagan's "dream" (a term he has used often in this context) of bringing about a "proper mix" between federal and state roles needs to be viewed in relation to what we consider to be the preeminent goal of the Reagan administration in the domestic public sector — social program retrenchment. Not only did Reagan wish to increase the authority of the states, but he also had strong opinions about how they should exercise that authority: they should join the federal government in its effort to reduce the size of the public sector. Since his conversion to conservatism and Republicanism in the early 1960s, Reagan has strongly opposed the values or at least the methods associated with many domestic social and urban programs at every level of government. He has consistently criticized welfare and redistributive social service programs, which conservatives believe undermine the work ethic and encourage dependency. In addition, Reagan has viewed subsidy programs to distressed areas as distorting markets and market relationships. His speeches and policies reflect steady opposition to "social engineering" and generally to the values which conservatives identify with the domestic programs that grew rapidly both in size and number at every level of government in the United States in the 1960s and 1970s.
Many conservatives and liberals alike have assumed that devolution and retrenchment would go hand in hand. As program responsibility was devolved to the states, less would be done by the states because of competition among states to attract business and higher income residents with low taxes and the generally more conservative orientation of state governments. The assumption was that if social program retrenchment occurred at the federal level in combination with devolution, the states, too, would pull back on social programs. The service reductions implied by the federal aid cuts would stick, and perhaps even be compounded by parallel state and local action.
It is our contention based on the field research we have conducted that this assumption has not proven true in many cases in the first term of the Reagan administration. It is true that public service levels in some program areas are lower than they were in 1981 because of cuts at the federal level. But it is also true that the state and local government responses to the 1981 federal aid cuts — through replacement funding, through a wide variety of financial coping and delaying measures, and through administrative reforms — has produced higher service levels than otherwise would have been the case due to the Reagan cuts. We also believe that the developments at the state level outlined in the case studies suggest that the states are poised to do even more in the future to protect and even extend service levels.
In sum, during this period in U. S. history, liberals seeking support for social programs have fared better in many states than they have in the nation's capital. Social programs have had a larger constituency in many states than expected. This is not the first time that liberals have found the states more receptive than the federal government. During the 1920s, Washington kept cool with Coolidge, while some states were passing child labor laws, experimenting with unemployment insurance plans, and expanding social services and benefits to mothers and children, the aged, the disabled, and other groups.
The lesson here is an important one for American federalism. A general pattern in the United States in the period since World War II has been for liberals on social issues to favor central government action, while conservatives tend to favor devolutionary strategies from the national government to states and localities. What we have now added is the observation that these positions may not be that astute, at least not as a general rule for political behavior.
In liberal periods (here, we refer to periods in which there is widespread support for social spending), it is true that it is likely to be easier and more efficient for the supporters of social programs to seek resources from one central source. But the flip side of this proposition is often ignored. In conservative periods, the supporters of social programs are likely to find that in many instances their best strategy is a devolutionary one. They may well find in particular areas of domestic policy that the best approach is to seek support from those states and major local governments which for various reasons are sympathetic to proposals for increased social spending.
These observations have important implications for the Reagan administration. Our initial assumption, and we believe the same assumption was made by officials of the Reagan administration, was that devolutionary measures would aid and abet the administration's overarching domestic commitment to retrenchment in the sphere of social policy. But this was not always the way it worked out. There is evidence from this study and from other sources that Reagan's federalism reforms have stimulated and are continuing to stimulate state governments to increase their efforts to meet domestic needs in the functional areas in which the national government either was cutting grants-in-aid or threatening to do so.
Like most generalizations, there are caveats to be entered. We found that even the most active and responsive state governments did not step into the breach in all of the federal aid areas in which the Reagan administration was pursuing its retrenchment and devolutionary policies. On the whole, the more highly targeted a program was on the poor, the more likely it was to be cut by the national government and the less likely it was that these cuts would be replaced by state and local governments.
In addition, the American federal system, as the case-study chapters in this volume amply demonstrate, is a many splendored and varied political system; the roles of different political institutions are influenced by many forces. In the case of state governments, federal aid policy is but one of the forces that affects the relative standing and influence of these middlemen of our political system.
Economic conditions also have a major effect. The steep 1981–82 recession hit some states much harder than others and caused changes in the relative responsibilities of states and localities. Moreover, in a number of states, important causes of changes in the state role predated the Reagan presidency. In several of the study states, for example, a major factor in bringing about changes was the passage in the 1970s of referenda that limited state and local taxes and spending. Nevertheless, in the pluralistic environment of the American political system, we believe that the behavior of state governments in response to the Reagan brand of federalism reform is notable and surprising.
The authors of the case-study chapters in this volume have in our view made a good effort to put Reagan's program in perspective. They repeatedly call attention to other forces at work affecting the role of state governments in the period of this study. At the same time, there is a strong and consistent theme across the sample states to the effect that the policy-making, administrative, and often the financial role of state governments is becoming more important, both relative to the central government and relative to local governments as a result of the way in which the Reagan system of ideas in domestic affairs has shined a spotlight on the state level. In many of the case studies, state efforts have focused on ways to continue services cut by Congress at President Reagan's urging.
One additional point needs to be made here before we take a closer look at the Reagan program; it concerns timing. Although there is no definitive barometer or scale of the health and vitality of state governments, the consensus among the experts who work in this field is that over the past two decades there have been a series of changes in the structure and procedures of state governments that have improved both their standing and capability. In January 1985, the U.S. Advisory Commission on Intergovernmental Relations published a summary report on the capability of state governments. Drawing on a wide range of studies on the finances, management, and institutional behavior of states, the report reached a very upbeat conclusion: "This study concludes that state governments have been transformed in almost every facet of their structure and operations." The situation, says the report, is vastly different from that of the 1930s when one expert quoted in the report said, "The American state is finished."
The point here is that the timing of Reagan's federalism-reform program was propitious from the point of view of supporters of social programs. The states were ready; and the strong signal and action of Reagan's program for federalism reform appears to have had a deep effect on the policy agenda in many states.
The American political system is intrinsically change-resistant. This is why we so often understand and interpret policy change as incremental rather than fundamental. And it is also for this reason that strong and highly visible policy shifts are required to bring about basic institutional changes in American government. We believe the Reagan program, and the way in which it has been discussed and understood in the field of domestic affairs and the media, is an event of sufficient importance that it appears to have permeated the political system and is likely as a result to have a lasting effect on American federalism.
Excerpted from Reagan and the States by Richard P. Nathan, Fred C. Doolittle. Copyright © 1987 Princeton University Press. Excerpted by permission of PRINCETON UNIVERSITY PRESS.
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