Power Shifts in Intergovernmental Relations: a Result of Fiscal Federalism
Fiscal federalism is the result of the statesÆ dependence on the national government for funds. Until 1913, the national government had minimal monetary resources, thus possessing little control over the affairs of the states. Once effected, the Sixteenth Amendment resulted in the amassing of government funds on the national level. This reserve of money enabled the national government to initiate a multitude of national programs--such as the interstate highway--as well as provide grants to the states. It is primarily through these grants that the national government can exert influence over state affairs; for, by designating restrictions in the distribution of these grants, the national government can compel states and localities to make or alter policies and legislation in accordance with its agenda. The manner in which the national government has wielded the influence of money throughout the history of the nation has continually altered intergovernmental relations. Since the Depression, fiscal federalism has caused the national government to dominate the states; recently, however, reforms have begun to return power to the states.
Policies and precedents of the New Deal centralized power in the national government. To remedy the devastation of the Great Depression, it assumed a more direct and prevalent role in the lives of the people. Congress passed the 1935 Social Security Act, providing retired persons pensions and benefits for the unemployed and disabled. In addition to Social Security, the government also established the Federal Emergency Relief Administration in 1933 which provided states with money for the needy. The Aid to Families with Dependent Children (AFDC) program was state-administered and federally funded, another example of state dependence on the national government. The Works Progress Administration is one of the multitude of programs implemented to provide employment to aid in recovery. Formerly a state responsibility, the national government became
the primary source for relief. The national government broadened its powers in response to this crisis and began to supersede the state governments in decision-making. As a result, the states began to relinquish their power and defer to as well as depend on the national government. This increase in federal power did not exist solely under RooseveltÆs Depression-era administration but extended over to later administrations as well.
The remainder of the century until the present was marked by legislation limiting the states even further. During the Great Society of the 1960s, Congress passed JohnsonÆs proposals for increased federal aid to education--augmenting federal control and involvement over education, a power reserved for the states. Moreover, Congress passed Medicare and Medicaid, health insurance plans for the elderly and the poor or disabled, respectively, expanding the federal role in social welfare programs. During NixonÆs tenure, existing programs of assistance for the aged, blind and disabled administered by the states were federalized, requiring more money from the national government. Additionally, general revenue sharing was signed into law, once again increasing state dependence on federal funds. NixonÆs New Federalism implemented major expansions of federal regulatory power over state and local governments. Concerned about the dominance of the national government, the reaction to this continual increase in federal power and influence is a decrease in cooperative federalism.
The government has recently shifted its former practices, creating legislation empowering the states. Through a series of tax-cutting, budget-cutting and deregulatory initiatives, Reagan lessened the role of the federal government in intergovernmental relations. Under his administration, general revenue sharing was ended, further advancing the liberation of states and localities from federal dominance. ClintonÆs administration began a steady campaign in the devolution of power from Washington to the states. States were recently given greater flexibility in administrating AFDC; they now have wide discretion in determining eligibility. The welfare overhaul bill gives states greater control over awarding benefits; policy will be determined largely by states and localities themselves. There is increasing support towards turning welfare, Medicaid and federal job programs over to the states, which would independently establish criteria for eligibility and administer the benefits. This would return the present system of cooperative federalism to a more separate, dual system.
Throughout the twentieth century, it is evident that the extent of the control exerted by the national government on the states and localities is a direct result of the practice of fiscal federalism. An unprecedentedly severe economic downturn caused the advent of cooperative federalism in intergovernmental relations, as a national crisis requires the involvement of the national government to obtain recovery. This involvement continued for most of the century, continually increasing federal power as the national government began to implement national regulation. Currently, intergovernmental relations are more inclined to favor the states, as a power shift to states is being promoted to reduce the size of the federal government. The roles of the national and state governments continually change in accordance with the state of the nation and the state of politics, and money is also an integral factor in the evolution of intergovernmental relations. Thus, fiscal federalism has a prevailing role in the shaping of the nation.
