Federalism and the Virus

By Mike Koetting May 12, 2020

I am not a big fan of the idea of states. It’s hard to see what reality they are mapping aside from historical precedent. Take Illinois. While the Chicago metropolitan area shares one media market, one air and water space, a common labor pool, a shared healthcare market and intertwined transportation, there are at least two state governments that get involved, often to peculiar results, and two other states impacted. Conversely, the rest of Illinois is perpetually aggrieved by the idea that Illinois government is overly shaped by Chicago.

The history of state governments in the U.S. is of course inextricably linked to the founding of the country. At the time of the Revolutionary War, political and practical identity was tied to individual states, which in fact had already evolved in different ways because of the political and economic circumstances of their founding.

At the time of the Constitution, there was simply no way of creating a unified country that didn’t carefully limit federal power over the individual states. No states, no country. It was as simple as that. It was also as simple as no slavery, no country. Giving states power to regulate that matter was a necessary condition for forming a country. It was a moral dodge required by reality. The Senate, and the electoral college, were part of the package.

Once the country was under way, states were admitted on something of an ad hoc basis, typically with the primary construct to incorporate new land while maintaining the balance between slave and non-slave states. Since the Civil War, the main impetus for maintaining the importance of states has been to maintain a political structure that allows former slave states to frustrate the underlying purpose of the Civil War and to fight liberal social impulses more generally

Some would argue that is a good thing. I am less certain. It recognizes minority rights to the extent regional preferences are different from national sentiment, but makes it more difficult to protect minority rights within the region. On specific substance, while some state experimentation has proved useful, the ever increasing interconnected, complexities of modern life make central coordination more important than ever. Moreover, much of the vitality of the country has moved to metropolitan areas that often overlap states and/or are at war with their state government.

Still, states persist. The current pandemic provides an interesting lens through which to view their current status. I see two conclusions and two questions.

1. The circumstances required a strong federal response.

We only got part way. And some of the federal responses caused problems, including the CDC’s botched handling of test kits and the FDA’s overly restrictive approach to approving testing.

There were material gaps in the federal approach, such as failing to develop a national testing strategy, sending states bidding against each for critical supplies, and major inconsistencies in the moral messaging. These are not inherent faults of a centralized government. They are rather manifestations of incompetence. Very few would argue that each state should have its own standards for approving medicine or that each state should have an international security agency to detect events that would eventually have big impacts back here.

If anything, the pandemic shows the need for a strong federal government. That might suggest less energy attacking “the deep state” and more energy trying to deepen the competence at important federal positions.

2. States responses are mixed

In the absence of a clear, federal command voice, governors filled the vacuum. While no state made perfect decisions, it became unquestionable that people were looking to their governor more than the central governmental bodies. The governors communicated both danger and resolution, and, for the most part, offered clear and consistent plans. This was a vote for the potential of the states to compensate for certain kind of inadequacies at the federal level.

On the other hand, the pandemic laid bare certain shortcomings in the distributed authority structure. Outdated stockpiles and spotty public health planning and facilities were problematic. Handling unemployment claims was another sore spot. The need for each state to have its own system is not obvious but the consequences of inadequate preparation and antiquated technology were obvious. This is true of many state systems. Do we really get enough extra value out of supporting (or not supporting, as turns out was often the case) these separate systems?

3. How will state experimentation work out?

It is too early to tell whether the ability of states to go different ways on the key issue of when to reopen the economy is a good thing or a bad thing.

New York Times (as of May 12, 2020)

If it turns out that states re-opening actually get good economic momentum without a major uptick in loss of life, it would be a chalk-up for state experimentation. If the loss of life is materially higher or the economic impact not great, much less so.

While I don’t have a completely closed mind on this—I am very worried about the economic consequences of what we are doing and the evidence on all sides is terrifyingly weak—this still seems problematic.

My first concern is that I find it hard to imagine how to evaluate these “experiments”. This is not simply a question of assigning values to various outcomes—although that is an issue—but interpreting the outcomes themselves. For instance, how many weeks would an “open” economy have to go before we were confident we actually knew what it told us?

I am also concerned about the potentially coercive effect on individuals these “experiments” might have. Those on the right complain that lock-downs restrict their rights. But saying that people will lose their unemployment if they don’t go back to work no matter how dangerous it is seems to me to be coercive as well. And the risk factors are related to economic status—which also correlates with poor insurance coverage.

I am less concerned about the argument that people cross state lines. They do. And they will travel. But in the realm of problems that seems relatively small. For the most part, the responses seem reasonably consistent by region, sometimes by explicit design.

Without further information, I think my preference is a consistent national plan for the basic reason it contributes to the creation of a united country in a difficult time. It might not be perfect, but nothing will be and we’d all be in it together. The current process exacerbates existing political and cultural issue without providing a framework for resolution because the “experiments” are so haphazard it is possible we will never know what they told us, certainly not in real time. Moreover, the process has become so acrimoniously partisan that we now have parts of the country rooting for bad outcomes—more death or more economic suffering—for the other part of the country. The fact the president argues against his own advisors, apparently in an effort to stoke partisan arguments, is embarrassing.

Prickly City by Scott Stantis

And even if we avoid the worst of those pitfalls, we have further undermined the idea that science and expertise should drive decisions rather than the pollical mood of the moment. Science and expertise are by no means always right. Particularly when the data is as weak as currently, it should be robustly debated. But policy choices are about odds of reaching an outcome. Over time, you can’t improve society’s odds of getting to a favorable policy outcome by going with your gut and ignoring science and expertise.

4. What will happen to states when the smoke clears?

State budgets have been shredded by the virus. Sales tax revenues, hugely important for states, are in the toilet. The deficits are mounting at record rates. And, unlike, the federal government, states must actually balance their budgets. Absent massive federal bailouts, this will mean drastic cuts—which, of course, will make the economic disaster more painful.

The federal government could help. But will it? It appears the Republican majority in the Senate is willing to let states fall into bankruptcy. Not that it’s clear what that means–among other things, state bankruptcy is not even a legal option. So for now, that’s only a rhetorical position.

But what is not rhetorical is that the fiscal structure of many states is at serious risk with no obvious way out. The risk is of course greatest for those states who have invested the most in their citizens.

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In short, the ultimate question governing the continuance of the federal structure is whether the advantages of having two separate models for meeting the needs of our citizens outweigh the disadvantages. While the Covid-19 epidemic has shown some of the advantages of our federalism, perhaps unsurprisingly, this has not changed my general belief that we would be better off reconsidering how we govern ourselves. Of course, as more states go broke, we may have no choice.