Chapter 16: The Historical Development of Federalism

“After a third of a century of power flowing from the people and the states to Washington, it is time for a New Federalism in which power, funds, and responsibility will flow from Washington to the states and to the people.”

—President Richard Nixon (1)

The Definitional Period of American Federalism

A truism about federal systems around the world is that political power is never equally balanced between the central government and the states. The central government ends up being stronger than the states. This generalization is true in the United States as well. However, as the first modern federal governing system, the United States has experimented inordinately with federalism and has gone through several historical stages.

The first stage doesn’t have an official name, but it was marked by states challenging federal authority, which ultimately gave way to officially recognizing federal supremacy. Let’s call it the Definitional Period of American Federalism. The country went through wrenching—and ultimately deadly—struggles over federal versus state power. This period is easy to date—from 1789 to 1865. We can think of this period in another way: states went from sovereign powers under the Articles of Confederation to subordinate units under the Constitution practically overnight, and then it took 76 years for that fact to sink in. This period was marked by several key struggles, all of which resolved in favor of central government power.

McCulloch v. Maryland (1819)—We’ve already talked about this case. States objected to establishing the second Bank of the United States. The Supreme Court ruled that states could not tax federal operations and that Congress had broad implied powers when its enumerated powers were combined with the Necessary and Proper Clause.

Gibbons v. Ogden (1824)—This case centered on interpreting Congress’ power to “regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes,” which is also known as the commerce clause. In the early nineteenth century, New York state gave Robert Fulton and Robert Livingston a monopoly on steam navigation, which they in turn licensed out to Aaron Ogden to operate steam powered ferries between New York and New Jersey. At the same time, the federal government gave Thomas Gibbons a license to operate ferries in interstate waters. Gibbons’ route competed with Ogden’s route. Ogden sued Gibbons. Ogden won the suit in the New York state courts, but Gibbons appealed up to the Supreme Court and won. The Court made several important decisions. First, it defined “commerce” broadly to include not just the literal shipment of goods, but any “commercial intercourse” between states. The Court said that while Congress could not regulate business activity that solely took place within a state’s boundaries, it could regulate commerce if part transcended state boundaries. Finally, the Court said that the federal law granting Gibbons a commercial license trumped New York’s attempt to give Ogden exclusive right to carry goods and people between New York and New Jersey.

The Nullification Crises—The perilous and unsettled nature of federal and state relations during this era was exemplified by state attempts to nullify federal laws. States effectively said, “We do not recognize this federal law as operable on us.” In 1798, Congress passed, and President John Adams signed the Alien and Sedition Acts. Kentucky and Virginia both passed resolutions nullifying the law in their states and asserted the right to disregard the federal laws with which they disagreed. The Kentucky resolution, secretly written by Thomas Jefferson, said that since the Constitution was created by the states, each state has “the unquestionable right to judge of its infraction,” which is a way to say that Kentuckians get to determine whether a law is unconstitutional. (2) This nullification crisis didn’t boil over because the Democratic-Republican/Jeffersonian victory in the 1800 election resulted in states repealing the offending federal legislation.

A more serious nullification crisis happened in the 1830s when southern states, which exported agricultural products like cotton, objected to a federal tariff law that they felt unduly punished the South and favored protecting northern manufacturers. The charge was led by John C. Calhoun, who resigned the Vice Presidency in 1832 so he could run for Senate from his native South Carolina and better lead the fight against the tariffs on the South’s agricultural goods. South Carolina passed a resolution nullifying the federal tariff in the state and prepared to militarily resist the federal government should it insist on enforcing the tariff. Congress passed a Force Bill authorizing the president to use the military against South Carolina, so the United States was on the verge of civil war. The situation was relieved when Congress passed a new tariff bill in 1833 that gave concessions to Southern interests, and South Carolina repealed its nullification resolution. (3)

The Civil War—As you learned in your history class, the North and the South became increasingly divided over the slavery issue and the political question of whether additional states would be admitted to the United States as slave or free—thereby determining the political balance in Congress. There is no space here to recount America’s slide into the meat grinder that was the Civil War, but Republican Abraham Lincoln’s presidential election was the final straw for white southerners who benefitted economically, culturally, and psychologically from slavery. Even though Lincoln asserted on many occasions that he did not believe in the inherent equality of blacks and whites, he did say things like, “There is no reason in the world why the negro is not entitled to all the natural rights enumerated in the Declaration of Independence, the right to life, liberty, and the pursuit of happiness.” (4) South Carolina repealed its ratification of the Constitution on December 20, 1860 and six states met in Montgomery, Alabama, on February 4, 1861 to form the Confederate States of America. Ultimately, eleven states joined the Confederacy, and the war between them and the Union killed at least 670,000 soldiers and civilians, freed 3.5 million people from slavery, and crushed the most serious challenge to federal authority in American history.

The Civil War was also a decisive victory for those who held that while the official name of this country is The United States of America, the states are merely administrative units of the people in whose name government operates. The Constitution begins with “We the People,” not “We the states.” Chief Justice Marshall, writing in McCulloch v. Maryland (1819), said the “government of the Union. . . is, emphatically and truly, a government of the people.” During the Civil War, Abraham Lincoln gave the Gettysburg Address to dedicate a cemetery on the site of a great battle between North and South in Pennsylvania. Students in elementary schools across America learn it by heart, but often they recite the final line like this: “that government of the people, by the people, and for the people, shall not perish from the earth.” In light of our conversation about federalism here, that passage is best articulated in a way that emphasizes that government is for people and not states: “that government of the people, by the people, and for the people, shall not perish from the earth.” 

Dual Federalism

Following the Civil War, the United States entered a period that political scientists call Dual Federalism, which is commonly called Layer Cake Federalism. Both names inadequately characterize what was happening. This period runs from 1865 to the election of Franklin Roosevelt in 1932. Despite the outcome of the Civil War, states continued to assert their prerogatives to govern exclusively in important public policy areas, and they were aided by Supreme Court rulings to that effect. The idea of dual federalism is that there are public policies over which the federal government predominates, such as foreign policy, tariffs, monetary policy, national defense, interstate commerce, and the mail. States took the lead in other areas of governmental responsibility like public safety, education, elections, business licensing, family and morals policy, inheritance and property laws, and commerce within state boundaries, including wages and working conditions. Note that state responsibilities more directly impinged on how people lived their day-to-day lives.

The legacy of the dual federalism era is not a pretty one for people who advocate for human dignity, and it is an embarrassing era even for those who argue today for states’ rights. The notion that vast swaths of public policy directly affecting people’s lives were off limits to federal intervention meant that during America’s industrial explosion, state legislatures could empower corporations at the expense of people and could embolden white supremacists and nativists just when whole new former slave and immigrant populations were struggling to establish themselves as equals in America. This was the era of state Jim Crow legislation limiting political and economic freedom for African Americans, the era of unregulated child labor, the era of unchecked corporate malfeasance, and the era of morals legislation used to keep women in their place.

Let’s highlight one example—the issue of child labor. Congress passed the Keating-Owen Act in 1916, regulating commerce involving goods produced by children. It was mild legislation from our perspective. It banned interstate sale of goods made by children under the age of fourteen and by children under sixteen if they were working more than sixty hours a week. However, in the case of Hammer v. Dagenhart (1918), the Supreme Court struck down the federal law as unconstitutional. Writing for the Court, Justice William Day said that manufacturing itself was not interstate commerce. Since the children were only involved in manufacturing—in this case, cotton—but not involved in transporting the goods once they were manufactured, the federal government had no power to legislate. The Tenth Amendment, said Day, reserved states’ powers, and that among these was the power to regulate manufacturing, even if the goods were intended to be shipped across state lines. (5) Thus, the federal government was powerless to ban or regulate child labor. It was the same story with federal actions to break up monopolies—U.S. v. E.C. Knight Co. (1895); federal laws to protect Blacks against violence—U.S. v. Cruikshank (1876); and federal laws to provide for full and equal access to public accommodations regardless of race—The Civil Rights Cases (1883). In all these cases, the Court said essentially that the Constitution was off the table as a possible help to make people’s lives better. The Supreme Court’s restriction on federal power also extended to states whenever they tried to limit business’ power to operate freely. For instance, in Lochner v. New York (1905), the Court struck down a New York state law that limited baker’s hours to sixty per week. The majority argued that state infringement on the right-of-contract between the bakers and their employer violated the individual’s liberty to engage in commerce. Corporations, in other words, should be free to exploit workers because said workers were free to go find another job.

Cooperative Federalism

Dual federalism gave way in the 1930s to what is known as Cooperative Federalism, which lasted until the late 1960s. Again, this is not a particularly good name. The twin disruptions of the Great Depression and World War II—and the response led by Democratic presidents—created an era that was marked by increased federal power. The Democrats in Congress combined with the Roosevelt administration and passed economic regulations and instituted social welfare policies that had never been seen at the U.S. national level. Under the New Deal, the national government regulated the banking industry, supported agricultural prices, set the first federal minimum wage, created unemployment insurance, established social security for the elderly, supported the right of workers to unionize and collectively bargain, and put people to work building schools, hospitals, and roads.

This period of Cooperative Federalism was marked by two important developments. First, and this is really the origin of the name, the federal government and the states became partners as they solved problems associated with the Great Depression, World War II, and then the Cold War. Many programs were entirely or predominantly financed by the federal government and administered jointly by the federal and state governments or solely by the latter. For example, unemployment insurance, which is part of the Social Security Act of 1935, continues to be administered by states. The National Interstate and Defense Highways Act of 1956 provided federal funding predominantly for interstate highways, while states had significant roles in planning and construction. Some people call mixing federal and state powers “marble cake” federalism.

The second important development in this period is that the Supreme Court finally acceded to government regulating the economy and protecting civil rights and liberties. Initially, the Court struck down Roosevelt’s initiatives such as the National Industrial Recovery Act and the Agricultural Adjustment Act. Roosevelt grew so frustrated that he proposed a court packing plan that would allow him to nominate new justices and expand the total number of justices on the Court. (6) Beginning in 1937, the Court abandoned its weird interstate commerce ruling found in Hammer v Dagenhart (1918) and began to treat America’s economic system as a truly national one. No longer would the law differentiate commerce into manufacturing regulated by states because it takes place within a state’s boundaries, or shipping regulated by the federal government because it was interstate commerce, or distribution regulated by states because it takes place within a state’s boundaries. Now, it’s all interstate commerce. A person digging coal in Kentucky is engaged in interstate commerce, even if they have never left the state, because the coal is likely headed to power plants in other states.

New Federalism

Beginning in the late 1960s, American federalism entered a New Federalism period, which is also sometimes called the Era of Devolution because of the ways that governmental power seems—in part—to have devolved back on to states. It’s confusing, if only because these different periods are clouded by so many contradictory events. A defining factor in the modern period is that in the thirteen presidential elections held between 1968 and 2016, Republicans have “won” eight of them. Two of those victories—Bush in 2000 and Trump in 2016—were solely the result of the electoral college giving the presidency to the popular vote loser. Nevertheless, the disproportionate number of Republican presidents in this period have been able to load up the Supreme Court and the federal courts with a disproportionate number of appointees who would be very comfortable if the United States were to go back to days of dual federalism and have the national government be powerless to act in many areas of public policy—particularly economic, worker safety, and environmental regulation. For example, four Supreme Court justices were ready to strike down the Affordable Care Act’s individual mandate as an unconstitutional extension of Congressional power, and it was only Chief Justice John Roberts’ decision–uncharacteristic for a conservative–not to join them that saved the law in 2012. (7) Earlier, in 1995, the Court ruled that the interstate commerce clause could not be stretched far enough by the elastic clause to constitutionally cover Congress’ attempt to pass a Gun Free Schools Act and ban handguns near schools. (8)

Republican presidents like Nixon, Reagan, and the two Bushes joined Democratic presidents Clinton and Obama in devolving federal powers to states where they could. Under president Nixon, the federal government began offering block grants so that it could support housing and community development while allowing states to figure out how best to spend the money. President Reagan proposed to eliminate the Departments of Education and Energy and transfer most of their functions to the states. He was unsuccessful. He was more successful in shifting federal support from categorical to block grants in areas beyond housing, thereby giving states more freedom. In the 1996 welfare reform law, President Clinton presided over the federal government transferring welfare power to the states. It was the largest transfer since federal welfare began. The Obama administration allowed California to set its own air pollution regulations. There are, of course, exceptions to this pattern. For example, under President George W. Bush, the No Child Left Behind Act of 2001 consolidated federal power over education.

Conclusion

The United States has a conflicted history of political power in part because of the federal structure built into the Constitution. Struggles over the overall balance of power will continue, as will fights about specific legislation and whether it vests decision-making power with the federal government or the states. Keeping in mind the theme of this textbook, you should look at struggles over federalism as arenas for conflict between corporations and the rich and the broader population’s desire to have effective government regardless of which level provides it. The corporate and financial elite may prefer some policies to be administered by the federal government and others by the states, depending on the benefits they can derive or the regulations they can avoid. The public’s need for good governance, regardless of level, is ever-present.

References and Notes

1. Quoted in Bruce Katz, “Nixon’s New Federalism 45 Years Later,” Brookings. August 11, 2014.
2. The Kentucky Resolution. Approved December 3, 1798. Archive in the Library of Congress as part of the Thomas Jefferson Papers, Series 1: General Correspondence.
3. Interestingly, nullification was not an exclusively Southern phenomenon. In 1854, the state of Wisconsin nullified the Fugitive Slave Act that Congress passed in 1850, which required free states to return slaves who fled to free states back to their owners. The Supreme Court struck down Wisconsin’s action as unconstitutional, an action which Wisconsin officially refused to recognize.
4. Abraham Lincoln in a debate with Stephen Douglas in Ottawa, Illinois on August 21, 1858. Quoted in Jill Lepore, These Truths. A History of the United States. New York: W. W. Norton and Company. Pages 277-278.
5. Hugh D. Hindman, Child Labor: An American History. Armonk, NY: M. E. Sharpe, 2002. Pages 64-70.
6. Officially, the court packing plan took the form of the Judicial Procedures Reform Bill of 1937, which would allow the president to appoint a new justice for every existing justice who was over the age of 70 and who had 10 years of federal judicial service.
7. National Federation of Independent Business v. Sebelius (2012).
8. United States v. Lopez (1995).