Focusing on the issue of federalism, this chapter describes the constitutional debate in 1787 over the relationship between the nation and the states, discusses how federalism has changed during the nation's history, concluding with an overview of contemporary federalism.

1. Federalism: National and State Sovereignty
   
   The decision to establish federalism as the form for the new national government was the most important constitutional decision of the 1787 convention. The Framers wanted to establish a national government that drew authority directly from the people while preserving the states as governing bodies.
   1. Federalism is the division of ultimate governing authority (sovereignty) between a national government and regional (state) governments.
   2. Federalism differs from a confederacy, which is a union of states in which the states retain all sovereignty; federalism also differs from aunitary government structure in which sovereignty is vested solely in the national government with the state and local governing units functioning as agents of the national government.
   3. Arguments presented by the Framerss for the superiority of federalism centered on protecting liberty, moderating the power of government and strengthening the union.
   4. America's national government has enumerated powers that enable the national government to provide for defense and commerce.
   5. The national government acquired implied powers through the Supreme Court interpretation of the "necessary and proper" clause. This enables the federal government to have the flexibility and responsiveness to meet changing national needs.
   6. The supremacy clause provided that national law would prevail over state laws and actions when there was a conflict between them.
   7. The Tenth Amendment to the Constitution provided that the states would have reserved powers.
      
      
2. Federalism in Historical Perspective
   
   Federalism has passed through distinct stages in the course of its development. The first phase from 1789 to 1865 was characterized by conflict between the nationalist and states'-rights views.
   1. The nationalist view, reflected in the McCulloch v. Maryland decision held that when national and state law conflict, national law prevails. The case also articulated the implied powers doctrine that held that the national government's powers extend beyond a narrow reading of its enumerated powers.
   2. The states'-rights view developed in the Dred Scott decision held that each state had the constitutional right to nullify a national law.
   3. The nationalist view was upheld by the election of Lincoln and Union victory in the Civil War.
      
      
   The second phase from 1865-1937 brought about the development of the principles of dual federalism and laissez-faire capitalism.
   1. Dual federalism, which held that a precise separation of national and state authority was both possible and desirable, as interpreted by the Supreme Court resulted in state supremacy in racial policy and business supremacy in commercial policy. Supreme Court interpretations of the Fourteenth Amendment especially in the Plessy case allowed southern states to segregate the races.
   2. Laissez-faire capitalism holds that business interests should be allowed to act without government interference. The Supreme Court interpreted the commerce clause to protect business from substantial regulation by either state or national governments.
   3. After 1937 the Supreme Court recognized that an industrial economy must be subject to some level of national regulation if it is to serve the nation's needs and interests, thus weakening dual federalism and laissez-faire capitalism.
   4. In the Roosevelt era the Supreme Court broadened its interpretation of the federal government's taxing and spending powers while upholding legislation of the New Deal programs.
   5. Changes in federalism that took place after the 1930s emphasized the concept of national citizenship--the notion that Americans should be equal in the rights and opportunities regardless of the state in which they live.
      
      
3. Federalism Today (Since the 1930s)
   
   The national government's policy authority has expanded greatly since the 1930s even though that authority has been reduced somewhat in recent years. Two countervailing trends in this development have emerged.
   1. The first is a long-term expansion of national authority that began in the 1930s and continued for the next half century.
   2. The second trend is more recent and involves a partial contraction of national authority known as "devolution."
      
      
   The states and citizens have become increasingly interdependent, providing the impetus for a stronger national government.
   1. National, state and local policymakers are encouraged to collaborate to solve policy problems. This is known as cooperative federalism, which stresses shared policy responsibilities rather than sharply divided ones. Programs are now jointly funded, administered, and determined.
   2. The federal government's involvement in policy areas traditionally reserved for the states has increased its policy influence and has diminished state-to-state policy differences.
   3. The federal government raises more tax revenues than do all the states and local governments combined, which led to the development of fiscal federalism. Fiscal federalism holds that the federal government provides some or all of the money for a program, while the states and localities administer it.
   4. Federal assistance (such as in grants-in-aid) provides a significant share of state revenue, though this varies from state-to-state. The two main types of federal assistance to state and local governments are categorical and block grants.
      
      
   Devolution is the idea that American federalism will be improved by a shift in authority from the federal government to state and local governments.
   1. Both budgetary pressures and a shift in public opinion led to changes in relations among national, state, and local levels of government.
   2. The Republican Revolution in Congress in 1995 took steps to decentralize federalism by reducing federal unfunded mandates and giving states more control over how money would be spent. States were encouraged by the 1996 Welfare Reform Act to take more responsibility for welfare reform. The federal Department of Homeland Security was created to coordinate govermental efforts to deal with terrorism threats.
   3. The Supreme Court in recent years is leaning more towards protecting states from congressional encroachment on reserved powers.
   4. Public opinion plays a role in defining the boundaries between federal and state power.