In thinking and reflecting on Michael Greve’s The Upside-Down Constitution over the past year, I still agree with my initial assessment that Greve’s competitive federalism gives us an enormous understanding of so many fiscal and regulatory problems in our current political practice. I think he convincingly shows why many of the states are broke with little hope of recovery, save a federal bailout. Moreover, it also demonstrates why the broken states continue their current course of irresponsible fiscal policy. What else is there for them to do, channel their inner Coolidge? Not bloody likely.

Greve’s competitive federalism also telegraphs why many states are refusing Obamacare funds. While the states were empowered to do so by the Medicaid portion of the Supreme Court’s Obamacare decision, many of the states also sense that they’ll be left holding the fiscal bag in a few years when the Feds no longer foot the bill. So we might say that certain states already know that our current federalism can’t continue much longer. The point, however, is will the village be destroyed before we can save it?

Greve’s federalism also observes that contrary to mountains of spilled conservative ink, the states aren’t the little lambs who must be protected from a voracious nationalist government bent on bringing them low. They’ve wanted to be brought low or rather to be repeat players in a game that treats federal tax revenues as an open commons that all can exploit. Greve calls this cartel federalism, we might also call it musical chairs federalism, before the music has stopped make sure you’ve grabbed your state’s share of the federal till. Convincingly, as Greve also notes, the major suits against New Deal expansionist government weren’t brought by the states. In fact, I’m unaware of any of the states challenging this revolution under a vertical federalism theory.

But let me state where I think Greve’s federalism, if not wrong, leads us away from a proper approach to American federalism. In the interest of taking up the important question of “What Kind of Federalism?” let me argue that we cannot merely see the states as just revenue maximizing authorities or view federalism as only worthwhile if it leads to chastened fiscal policies and market-based regulatory programs in the states. These are certainly good things and we certainly need more states who follow this course of action. But, to get federalism right, we have to get politics right. So while the competition/cartel federalism dichotomy Greve provides gives us an abundance of insights regarding the depraved state of our federalism, it also elides over what we might call the truth about American Federalism.

Greve attempts to apply a hard-headed economic rationalism to understanding how the constitutional order went wrong. In this attempt he gets most of the interpretation of our current ills right, but as far as the answer to those problems go, I’m doubtful that such rationalism has it right.

The hard-headed rationalism of the founding eventually came unglued. What reason have we to think that we could recover it or devise better institutions?

James Madison in Federalist 45 deplores the pettiness of the states and their concerns with powers they wanted to retain under the new Constitution. Madison, here, is urging that the new Constitution was built for citizens not states as states. Madison’s fears about the states behaving under the Articles of Confederation as squabbling polities threatening commerce, property rights, and various individual rights were certainly warranted. But listen to Madison in Federalist 39 on the states and the foundation of the new government:

the constitution is to be founded on the assent and ratification of the people of America, given by deputies elected for the special purpose; but on the other, that this assent and ratification is to be given by the people, not as individuals composing one entire nation, but as composing the distinct and independent states to which they respectively belong. It is to be the assent and ratification of the several states, derived from the supreme authority in each state . . . the authority of the people themselves. The act, therefore, establishing the constitution, will not be a national, but a federal act.

Now join Madison’s argument here in Federalist 39 with a letter he pens to Thomas Jefferson in the fall of 1787 that the state governments will stand ready in the case of violations of their reserved powers under the Constitution to retake said powers. Madison said something remarkably similar in Federalist 44 that should one or more branches of the national government use power beyond constitutional bounds, the state legislatures will mark the violation. The states will “sound the alarm to the people,” Madison says.

And that is precisely what Madison effected in his Virginia Resolutions of 1798 where the Virginia legislature announced to the country that passage of the Alien and Sedition Acts were a “deliberate, palpable, and dangerous” exercise of power not granted by the Constitution. As Madison scholar Colleen Sheehan asked in this space:

Would any of the current state legislatures sponsor such resolutions today if the national government were to engage in a “deliberate, palpable, and dangerous” exercise of power not granted by the Constitution?[2] If not, is it because the state legislatures don’t dare to challenge the national government, the way that Jefferson and Madison did? Or is it because they know such efforts would be futile? Do they accept the tremendous growth of national governmental power in the twentieth century and view the states as merely subordinate administrative units that must obey the powers in Washington? Or, like the Federalist-controlled state legislatures in the other states in 1798, do they reject the Jeffersonian and Madisonian view that the states have a role in checking abuses of power by the national government, supposing that this role is the sole province of the national judiciary?

Now let me be clear, I’m not calling for acts of nullification or state interposition. For that, maybe you look to Thomas Jefferson’s Kentucky Resolutions of 1798 that included a fairly open threat to dissolve the American Union if the claims of the Resolutions were ignored by the Federalist dominated national government. I think this is a wrong way to go. Instead, walk more with Madison here. The state legislatures prove their worth by being vehicles of popular opinion and protest for the citizens against runaway government. To quote Madison in his essays against the Federalist Party “[W]ere the state governments abolished, neither the voice nor the sense of ten or twenty millions of people, spread through so many latitudes as are comprehended within the United States, could ever be combined or called into effect, if deprived of those local organs.” Notice Madison, unlike Jefferson, doesn’t say much if anything about state sovereignty as the purpose of the state legislatures.

If the great truth of our political order is that the Constitution constrains the government and that the people are sovereign over the Constitution, then the federalism of our constitutional experiment means that the citizens are not alone before the might of the federal government, but are gathered in by their state governments who hold the crucial responsibility of ensuring that their reserved powers are not lost to either the lie of wholesale centralization or the lie of intergovernmental power sharing or cartel federalism.

Fundamentally, Madison’s arguments challenge the notion that state governments are inherently revenue maximizing authorities or beings with interests who occupy political office. While it is true that they can function in this capacity, and as Greve has demonstrated, do function in such a capacity, it isn’t the whole story. We might note that self-interested political actors might get it wrong, as much as they get it right. Competition among branches and governments could result in the warding off of dangerous encroachments from other governmental entities, but it could just as easily lead among repeat government players in collusion, revenue sharing, and a redistributionist politics. Maintaining free government requires more than self-interest; it requires courage, responsibility, generosity, sacrifice, love, qualities that are the opposite of self-interest. And I think that our American political history bears me out on this point.

In the second part of this post, I want to engage the Tocquevillean and Ostrom schools of thought that federalism might actually provide opportunities for the positive development of liberty and the human spirit.