Federalism and the Constitution: Competition versus Cartels

Federalism questions are at the heart of today’s intensely controversial policy debates. From education to disaster relief to health care and insurance, federal arrangements are failing, and the federal structure itself has reemerged as a subject of public debate. Bloated bureaucracies defy reform and governments pursue ever-deeper debt. These debilities loom especially large in times of economic stress and widespread public disaffection.

This essay examines the sources and the scope of federalism’s failures. It provides a trenchant, constitutionally grounded analysis with profound implications for a range of current policy debates. Federalism’s restoration requires not merely rebalancing the federal-state relationship through decentralization. Rather, we must restore the structure of federalism to competitive federalism—which encourages states to compete to enhance freedom and economic growth—in response to the rise of cartel federalism, which squashes competition between the states and makes states dependent on the federal government.