Federalism. Great word. Great concept. In theory, it is an important way to balance the powers between the national and state governments. In Federalist 45, James Madison described the role and scope of both levels of government this way:
“The powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace, negotiation and foreign commerce. … The powers reserved to the several States will extend to all the objects which in the ordinary course of affairs, concern the lives and liberties, and properties of the people, and the internal order, improvement and prosperity of the State.”
Take fiscal issues. Under a pure federalist system, states should set their own economic policies rather than follow directives from Washington. If states can differentiate themselves on the basis of taxes, spending, and regulation, each of us Americans has more leeway to decide which particular rules under which to live. If we’re dissatisfied with the policies of the state we live in, we can register our discontent by voting with our feet and moving to another state. This competition for residents – and the tax-dollars they pay – helps keep state officials in check, strengthening their incentives to keep taxes and other intrusions modest.