Q and A With Paul Posner: July/August 2010

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By Alan Greenblatt

There’s an irony at the heart of the Obama administration’s approach to federalism. On the one hand, President Obama signaled at the outset of his tenure that he was interested in working collaboratively with states and local governments—and he’s offered them more financial help than any president in recent years.

On the other hand, Obama has presided over an accelerating centralization of power and decision-making at the federal level in major areas of domestic policy including education and health care, expecting states to carry out national programs and priorities.

To gain perspective on all this, State Legislatures turned to one of the country’s leading experts on federalism. Paul Posner has overseen intergovernmental programs at the federal Government Accountability Office and the National Academy of Public Administration. Currently, he directs the public administration program at George Mason University in Virginia.

STATE LEGISLATURES: How would you describe where we are with federalism today?

PAUL POSNER: It seems as if we’re entering a period where the federal system is another battlefield for ideological wars. The battle on these issues has become more intense and more ideological. I don’t recall a time when states have become the forum to openly challenge federal leadership, really since the Civil Rights era. During the last decade, states have become more restive and used their own prerogatives to challenge national laws. That’s relatively new.

New federal thrusts prompt state counterthrusts on things like health reform, with these lawsuits from the attorneys general. It didn’t start with Obama, it started with Bush, when No Child Left Behind and Real ID were challenged by the states in many ways. States have become a staging area for policy actors who disagree with the federal outcome. And the reverse is true, with this new federal lawsuit seeking to block the Arizona immigration law.

SL: When Obama took office, it seemed like he wanted to start partnerships with states and localities, but he’s often used the money he’s offered the lower levels of government to get them to dance to his tune.

POSNER: Obama was able to move away from mandates and more coercive tools and strategy by going back to the LBJ model and using the carrot rather than the stick. Some of the things they did were quite clever. Race to the Top (an Obama education initiative) deserves a gold star from a federalism perspective. You had a national goal that was achieved not through a one-size-fits-all mandate but a clever series of carrots.

SL: What happens as the federal spigot gets shut off? Obama wasn’t able to persuade Congress to send more money to states for Medicaid and teachers’ salaries.

POSNER: As money gets tighter, things have already moved back to the more preemptive tools. We start to see that with the financial regulation bill and arguably when you look at the climate change bill, which essentially preempts state cap-and-trade programs in California and the Regional Greenhouse Gas Initiative, far more than in the previous climate bills in 2007 and 2008.

Certainly health care reform was an area where the governors feel they’ve been left in the dust, with $25 billion in unfunded costs, according to the Congressional Budget Office, over the next 10 years. The states are now responsible for more patients under Medicaid and with the exchanges they’ll be responsible for covering more Americans than the federal government is. That is a big change and it’s not fully funded.

There was no summit with the states because the administration had bigger fish to fry. It was intent on using the states as the vehicles for near-universal coverage. As the going got tough, states felt locked out of the room.

SL: How do you explain the administration's inconsistency when it comes to federalism?

POSNER: They have an opportunistic view of the states. Where the states can help them achieve their goals, they’re very friendly. When they need to use the states, they adopt a more coercive approach. Any time the national government has strong objectives, if I was a state or local government official, I would watch out.

But one of the interesting things is that while it’s easy to see where the risks are for states and locals, there may be opportunities out there. One is on the tax front. There’s a growing view that a new tax has to be part of the federal deficit reduction strategy and that tax will probably be a value added tax (VAT).

For states, they could lose their sales tax, or find themselves with a strong competitor for sales taxes. But if they can strike a deal like Australia and some provinces in Canada, they could piggyback onto a strong fiscal base. A federal sales tax could reach services, which the states have never been able to do.