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  • National Debt Will Force Devolution of Power to the States

National Debt Will Force Devolution of Power to the States

William L. Kocacs

November 2023

National Debt Will Force Devolution of Power to the States

Part II:  Series on Devolving Power to the States

As the spending minuet plays out between the House and Senate over appropriations, supplemental spending for wars, and government shutdowns, a wall of debt is being built around the Congress. With an estimated $45 trillion national debt by 2030 and interest payments exceeding a trillion a year, reality will force our lawmakers to stop spending. One of their first cuts will be to reduce and eventually eliminate the $1.2 trillion Congress gives to states as a bribe to operate federal programs that the federal government, many times, has no authority to operate. This occurrence will be the beginning of the devolution of power to the states.

How did the federal and state governments get into this bind? More importantly, how do they get out of debt?

The answer is clear: if it’s constitutional to increase federal power, it must also be constitutional to decrease it. This flexibility allows the federal government to return to the states the powers taken from them over the past eighty years. Devolution of power will be the lynchpin that keeps a de facto bankrupt Union together.

The growth of the federal government has been the only unifying ambition of Congress, presidents, and the courts since the dawn of the Republic.

The expansion of federal power started with Chief Justice Marshall’s 1819 decision in McCulloch v. Maryland. Marshall not only solidified all the federal government’s enumerated powers, he broadly applied the ‘necessary and proper clause’ to establish sweeping implied and incidental federal powers. He indicated no phrase in the Constitution limits the use of these implied powers.

His decisions elevated the Supreme Court to being the final arbiter of constitutional issues. By skillfully combining the Constitution’s enumerated powers with its implied powers, Marshall designed a governing structure with few limits on federal power short of a revolution.

While the Supreme Court approved the accumulation of massive federal power early in the Republic, it took until the 1940s for the court to erase the Tenth Amendment and state powers from the Constitution.

The demise of the Tenth Amendment arose when the Department of Labor sought to regulate local wages. States argued wage regulation was not an enumerated federal power in the Constitution. Therefore, such power rested with the states. Unfortunately for the states, a unanimous Supreme Court in United States v Darby (1941) held the Tenth Amendment was merely a “truism” since the substance needs to be determined by what powers are delegated to the federal government from any part of the Constitution. In Darby, the court held the federal government has the constitutional authority to regulate local wages under the Commerce Clause.

The ever-expanding Commerce Clause.

Using its expansive interpretation of the Commerce Clause, the Supreme Court sanctioned the massive growth of what has become the Administrative State. It transformed a country that practiced federalism (a system of governance in which two levels of government control the same territory) into a nation of federal rule. Over eighty years, Congress enacted thousands of laws and over 200,000 regulations that reach almost every activity and product in the nation.

Between 1937 and 1995, the Supreme Court did not strike down a single law expanding federal power. In 1995, it finally struck down a congressional enactment involving gun possession in a schoolyard and another case involving violence against women, finding both to be intrastate, not interstate, commerce. After minimally limiting federal power, the Supreme Court returned to rubber-stamping all future congressional enactments.

Gaps in federal power over states were filled by bribing states to pursue national priorities.

A Brookings study on state budgets noted, “In 1900, states and localities raised $1.75 for every $1 of federal revenue. They performed all government activities except national defense, foreign relations, [federal] court proceedings, and postal services.” While the federal government made grants to the states in this period, those grants generally subsidized existing state programs.

Since the Great Depression, Congress enacted many new social programs, some of which it did not have the constitutional authority to implement. To overcome its constitutional limits, Congress raised federal taxes to generate sufficient funds to make grants to states to incentivize them to implement federal wishes. By 1960, there were 132 state grant programs. Today, federal grant programs range between 1,000 to 1,300. In 2021, these grant programs  cost the federal government $1.2 trillion annually. The federal government taxes the American public to pay for the grants it makes to the states to have federal wishes implemented.

According to the Bureau of Census, federal grants to states in FY 2020 represent 35.9% of state revenues. While states accept these grants, they come with federal handcuffs. Compliance with many federal mandates often distorts state priorities by displacing local programs that may be more significant to the state’s citizens than the federal programs. Receipt of federal funds can require states to provide matching funds, comply with federal regulatory mandates, and increase personnel for program management.

States are beginning to resist oppressive federal regulation.

More than a few states are now resisting implementing federal programs they do not want to administer or are not being fairly compensated for managing.

State frustration with implementing federal programs started with the conflict over sanctuary states and cities during the Trump administration. Over three hundred states and cities refused to enforce federal immigration laws even though they accepted federal grant monies for law enforcement associated with these programs.

The federal-state conflict, however, is over more than Sanctuary cities. Twenty-three states and the District of Columbia have legalized marijuana, notwithstanding it is illegal under federal law.

Additionally, some federal programs only cover a fraction of the implementation cost. States implement approximately 96% of federally delegated environmental programs but only receive 28% of the cost of implementation. At some point, states will refuse to implement the unwanted or underfunded federal programs, or the feds will increase state funding. Making this decision will depend on the financial situation of the federal government.

Federal deficits will be the catalyst to stop state funding.

Complicating state dissatisfaction with the federal grant programs is the federal government’s financial mess.

The federal government’s interest payments for FY 2022 are $475 billion. CBO projects that net interest costs could total $640 billion in 2023 and soar to $1.4 trillion in 2033. The combination of increasing national debt and soaring interest payments on the debt will cause interest payments alone to exceed the total amount of all grants made to states. The federal government will need to find hundreds of billions of dollars annually to service the increased debt, or it will need to find budget reductions, such as state program grants, to remain in the same financial position as today.

The conflicting trends of states not wanting to implement specific federal programs and the federal government not having sufficient money to fully compensate the states for implementing its programs will start the debate over which federal programs should be administered and by whom.

The federal government’s inability to fund state programs will be the catalyst that drives the states to eliminate the implementation of those programs and spark more freedom to implement programs sought by their citizens. Hence, devolution of power will begin.

William L. Kovacs has served as senior vice president for the U.S. Chamber of Commerce, chief counsel to a congressional committee, and a partner in law D.C. law firms. His book Reform the Kakistocracy is the winner of the 2021 Independent Press Award for Political/Social Change. He can be contacted at [email protected]

Part I:  Fix a Government Too Big to Govern: Devolve Power to the States.

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  • Feds Diminish State Sovereignty to Secure Unchecked Power (58) (Part III of V)

Feds Diminish State Sovereignty to Secure Unchecked Power (58) (Part III of V)

William L. Kovacs

August 2021

Feds Diminish State Sovereignty to Secure Unchecked Power (58) (Part III of V)

Part III of the series “Can the U.S Unite? If not, How Does It Divide?” addresses how the federal government, over a century and a half, amassed power by diminishing state sovereignty. It achieved this outcome by systematically manipulating the vagueness of the Constitution to eliminate the few constitutional restraints on its power. Now as the sole ruler of the nation, the lack of any check on federal power is resulting in national decline.

States retain the Constitutional right of self-government until feds diminish it

While the North’s victory in the Civil War settled the supremacy of the Federal government over states on the issues of civil rights, the right to vote, and the application of the Bill of Rights to the actions of states, the federal government has dramatically expanded its powers over states and persons using other vague provisions of the Constitution never intended for the federal amassing of power.

What is so frightening about the accumulation of federal power is our Founders believed the Constitution granted only limited powers to the federal government. Unfortunately, from the beginning of the Republic, all three branches of the federal government, realized  “The Constitution of 1788 contained very few specific restrictions on the ways in which the power of the national government could be exercised against its people.” As the power of the federal government expanded, the power of the states and citizens was reduced.

So, while the U.S. Supreme Court may hold a state does not lose its distinct and individual existence, or its right of self-government by being part of the Union, such belief is a pure illusion. Other than the rights protected by the Bill of Rights and the three Civil War Amendments, the only other protections citizens have against the federal authority are those given us by legislation, and those protections can easily be repealed by Congress, ignored by the Executive or struck down by the courts.

A few examples tell the story of the incredibly shrinking power of state sovereignty and their ability to protect the freedom of citizens.

Direct Election of Senators: Perhaps the most significant change in the federal/state relationship, other than the Civil War Amendments to the Constitution, is the direct election of Senators, adopted in 1913 by the XVII Amendment to the Constitution. Prior to 1913 state legislatures elected Senators. While the direct election of Senators is a democratic change, it dramatically changed the power structure of the nation.  A Senator elected by a state legislature is accountable to the state. Senators elected by the people are independent, representing themselves, their political party, and large financial contributors. For Senators elected by the people, service to their state is merely a pleasant, fleeting campaign thought on the road to the “presidency”.

 

The Irrelevant Tenth Amendment: Our Founding Fathers believed the national government was one of the limited powers, having only those specifically granted it by the Constitution. Therefore, powers other than those enumerated in the Constitution, rest with States or the people. To enshrine this belief, the X Amendment to the Constitution reads “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

While the federal government remained small in size and authority, the power of states was not frequently questioned. When the federal government sought, during the Great Depression, to greatly expand its powers to implement the New Deal, the limits of federal power became a Constitutional issue. The question of the extent of federal power first arose when the Department of Labor sought to regulate wages. States argued wage regulation was not enumerated in the Constitution, therefore, it was not a federal function since, under the X Amendment, such power rested with the states. Unfortunately for the states, a unanimous Supreme Court, in United States v Darby, (1941) stripped all meaning from the X Amendment. The court held the X Amendment was merely a “truism” since the substance needs are determined by what powers are delegated to the federal government from any part of the Constitution.  In Darby, the court held the federal government has the constitutional power to regulate wages under the Commerce Clause. This holding ignited the massive expansion of federal power.

The Ever-Expanding Commerce Clause: Using the powers granted under the Commerce Clause of the Constitution, “to regulate Commerce with foreign nations, among the several states, and with the Indian tribes,” the Supreme Court sanctioned the massive growth of what has become the Administrative State. The federal government can now reach almost every activity in the nation, i.e., labor, environment, securities, even children’s toys, and the treatment of animals. The federal government issued 190,000 new regulations (which are laws) between 1976 – 2017 and passed so many new federal laws, no one knows how many.

The Supreme Court did not strike down a single federal law expanding federal power between 1937 to 1995. In 1995 it finally struck down a congressional enactment involving the possession of a gun in a schoolyard. The question was whether one gun so sufficiently impacted commerce that the federal government could regulate it. The court found, that the possession of a gun, did not substantially impact interstate commerce. The Supreme Court struck down another case involving violence against women, as being intrastate, not interstate, commerce in nature. After minimally limiting federal power, the Supreme Court returned to rubber-stamping all future congressional enactments.

Any gaps in the feds power over the states were easily filled by bribing states

Whatever state activities the federal government cannot regulate through the Commerce Clause, Congress can reach by using its tax and spend powers under the Constitution. By placing conditions on the grants, it makes to states, the federal government can entice states to do whatever federal business it wants done in order to receive federal money.

Prior to the pandemic, the federal government made $533 billion in grants to states in 2018, about 30 % of state budgets, to implement federal programs. With federal Pandemic funding flowing into state budgets, by hundreds of billions of dollars, States are now under more federal control than ever before.

Only a few superficial limits on federal power over states

It appears there are only two marginal limitations on the extent of federal power over states. First, the feds cannot regulate purely local activity however, even this limitation is questionable. The Supreme Court has even found the production of agricultural products grown for personal consumption during the depression and marijuana grown for personal medicinal use, have cumulative impacts on commerce, as such could be subject to federal regulation.

A second limitation on federal power, it cannot commandeer state personnel or resources for federal purposes. To get around this limitation, the federal government merely bribes states with tax dollars likely sent to DC by the states.

Since Darby eliminated any federal respect for states, all three branches of the federal government abandoned any belief that states are sovereigns and capable of self-government. By working together, the three branches of our government, have manipulated the Constitution to expand federal power at the expense of state power. The result is a federal government free of all checks on its power.

As state sovereignty is constantly being diminished by the feds, some states are fighting back. Part IV will discuss how the states are fighting back. This state resistance raises two questions – how long can a “Civil,” Civil War continue? and what are the options for states crushed by federal power to regain some sovereignty?

Links to:  Part I and Part II