Where We Stand: Our Principles On Strengthening Federalism

Broad national issues such as domestic security, national defense, provision of justice, public health, aid to veterans, patent protection, immigration, and customs are duties appropriate to a national government. Government programs in support of trolley cars, restaurant renovation, summer theater, and replica slave ships are a few of the many that are inappropriate.

Existing federal programs better left to the states include low-income housing assistance, wildlife and forest management, farm policy, urban revitalization, passenger rail, and education.

Government efforts to promote recycling, day care, homeownership, commercial research and development, recreation, and weather forecasts are among existing federal functions better left to voluntary transactions among private- sector participants.

Having the responsibility for specific duties and services to the public does not imply that government, through its facilities and workers, must actually provide the service. Instead, government may transfer the effort and the resources to fulfill it to responsible private-sector participants who can provide better quality at lower cost. Government may have the responsibility of feeding the poor and the hungry, but it need not do this through governmentowned farms and supermarkets.

Where government is involved in the provision of services, experience supports the Founding Fathers’ view that states will be the innovators in finding creative and effective ways to provide those services. The success of the bipartisan welfare reform effort of the 1990s relied almost exclusively upon the innovative response of states that used the law’s flexibility and incentives to create more effective solutions to local problems. For practical as well as constitutional reasons, when the federal and state governments operate a program, federal policy should systematically foster state innovation.

The federal highway program was created in 1956 to build the interstate highway system, an objective that was met in the early 1980s. Absent a clear objective in the years since then, the highway program has become just another spending program, and the motorists who pay the federal fuel taxes that fund the system suffer accordingly as roads become crowded and poorly maintained. With the interstate completed and with today’s most pressing traffic problems regional and/or local in nature, a centralized, one-sizefits- all program run by Washington bureaucrats is no longer appropriate or effective.

In countries throughout the world, government-owned airports and air traffic control systems are being privatized through sales of assets or shares to private-sector investors and operators. In return, the public receives a windfall from the sale and continues to benefit in future years as privatized tax users become taxpayers. To facilitate such transfers, government should review its existing legal and regulatory mechanisms to ensure that they provide for the identification of opportunities and for the orderly transfer of public service provisions to private providers. Such mechanisms to achieve cost-effective, high-performance partnerships between government and the private sector include competitive contracting, asset sales and leases, and vouchers, all of which the federal government has used with considerable success in the recent past. These programs must be reinvigorated and aggressively implemented as part of any effort to reduce the size and role of government in the U.S. economy.

Federal quantitative performance goals should be similar to those initially adopted as part of President Bush’s competitive contracting program and should link federal funding to the successful achievement of those goals. The competitive contracting plan introduced by the Bush Administration in 2001 has been watered down in response to congressional efforts to protect civil servants and by agency reluctance to make tough choices to improve operations and reduce costs. As a consequence, Washington bureaucrats are even more entrenched than before, and the federal workforce has grown significantly, even in those agencies without any security responsibilities. Agency heads should once again be held accountable for meeting ambitious, quantitative goals that are expressed in terms of the percentage of the workforce to be competed with the private sector each year under the guidelines of Office of Management and Budget’s Circular A-76.

With Amtrak, for example, subsidies should be phased out over a specified period of time, and such funds as are committed should be contingent upon measurable reductions in the system’s financial losses. Failure to make such improvements would lead to an even faster reduction in subsidies to compel compliance. More generally, the federalism techniques used to reform welfare in the 1990s should be used to spur innovative approaches by states in a range of programs.Welfare reform involved the federal government setting the national goals of the program and then inviting states to propose innovative ways of achieving those goals. States receive financial rewards based on the achievement of the goals. Using this model, Washington should devolve K–12 education funding fully to the states by linking federal funding to measurable improvements in students’ educational improvements and rewarding success. Similarly, the President and Congress should link federal funding in Medicaid and other health programs to agreed federal–state goals of reduced health uninsurance and other outcomes. Such federal–state agreements should include agreed goals, negotiated commitments, reform or elimination of federal rules hampering a particular state, new federal policy options available to states, and rewards to states for success in achieving or exceeding goals.