Constitution Ave NW 2100 signpost with the Lincoln memorial behind it in Washington DC (Photo from American Habits)
- Jameson Taylor writes that states must assume their proper place as independent governing bodies in order for the administrative state to be rightsized.
One of the nearly fatal faults of the liberty movement during Donald Trump’s first presidential term was the near abandonment of federalism. We must not make this mistake again. No matter what the new ”DOGE” proposes, the states must assume their proper place as independent governing bodies in order for the administrative state to be rightsized. In this role, states must adopt both a defensive and offensive stance, passing legislation intended to forestall federal takeovers, taking on tasks that do not properly belong to the federal government (such as education and workplace safety), and reducing the size and scope of state agencies.
The states must get to work
On the eve of the 2016 election, conservatives were anxious. We were facing an expansion of the Affordable Care Act under Hillary Clinton. We were losing the fight to stop Obama’s Clean Power Plan. We were weary from battles over the Waters of the U.S. rule, net neutrality, campus free speech, and due process.
President Trump’s victory was so unanticipated, it seemed almost miraculous. Trump’s election meant a realistic chance to repeal and replace Obamacare; a contraction, if not near stoppage, in federal rulemaking; and an opportunity to appoint originalist-minded judges. During Trump’s tenure, Congress also nodded toward state-led initiatives with the passage of the Right to Try Act and the First Step Act. Most significant, the U.S. Supreme Court returned the regulation of abortion to the states.
Federalism seemed to be humming along. Except federalism is not a grant of power or restraint from the federal government. Federalism is the exercise of state power. And, so whatever federalism gains seemed to be gotten under Trump were quickly revealed to be hollow as the states, with few exceptions, capitulated to federal health bureaucrats during the Covid-19 pandemic.
Federalism efforts revived somewhat under Biden. Florida and other states started pushing back on vaccine mandates. Texas and Oklahoma tried to go their way on immigration enforcement. For the most part, though, state resistance to federal mandates was subdued thanks to massive amounts of federal funding channeled through ARPA (American Rescue Plan Act), Medicaid, and other initiatives. The Biden administration had learned the lesson that it’s far easier to pay off the opposition with stimulus funding and tax credits than to impose unfunded, unconstitutional mandates on state governments.
Federalism, under Trump’s second term, is at a crossroads. Conservative states and governors have failed to lead, even as Republicans have held a majority of gubernatorial seats almost every year for more than 30 years. If even just five of these governors had resisted Biden’s domestic agenda, it would have stalled.
This time, statewide elected officials and state lawmakers cannot sit back and let Trump lead the charge. The challenges facing our country are too significant for one presidential administration to resolve. Instead of hiding under Trump’s shadow, state policymakers should take advantage of what may well be a final opportunity to demonstrate that they can govern themselves and their communities. In addition, they should resist demands to centralize even good ideas, like voter ID.
What is a state?
State legislators are not only ignorant of the concept of state sovereignty, they are afraid of it. However according to founders, like James Madison, the states are sovereign entities that share power with the federal government, which derives its own sovereignty from the states themselves. Because of this arrangement, it was almost impossible for the founders to conceive of state sovereignty as secondary to federal power. Writes John Dickinson:
In short, the government of each state is, and is to be, sovereign and supreme in all matters that relate to each state only. It is to be subordinate barely in those matters that relate to the whole; and it will be their own faults if the several states suffer the federal sovereignty to interfere in things of their respective jurisdictions.
Fortunately, the U.S. Supreme Court has not forgotten. In the 2012 NFIB v. Sebelius (Obamacare) decision, Chief Justice John Roberts affirmed:
For this reason, “the Constitution has never been understood to confer upon Congress the ability to require the States to govern according to Congress’ instructions.” New York, supra, at 162. Otherwise the two-government system established by the Framers would give way to a system that vests power in one central government, and individual liberty would suffer.
Three ways states can play defense
In practice, the doctrine of state sovereignty means the states can check federal power in at least three ways:
- Refusing to cooperate with federal policy;
- Refusing to accept federal funding; and
- Refusing to implement federal shadow guidance.
The first of these strategies is a well-established principle called the anti-commandeering doctrine, or what James Madison refers to in Federalist 46 as the “refusal to co-operate with the officers of the Union.” Anti-commandeering is not nullification, which entails the outright renunciation of federal policy. Rather, it is an unwillingness to use state and local resources to help enforce federal policy. The refusal of many states to enforce federal marijuana laws is a recent example.
The second approach, declining to take federal money, is related to the first. It is because of the anti-commandeering doctrine that the federal government must generally “bribe” states into adopting federal mandates. A prominent example is the Obamacare Medicaid expansion to able-bodied adults, incentivized by a 90 percent federal match. Ten states have valiantly refused to take the money.
A third defensive posture for states is declining to implement federal shadow guidance. Shadow guidance refers to directives that lack the force of law because they have not gone through the formal (APA) rulemaking process. Under Biden, the Department of Justice, in particular, leaned into using shadow guidance to “‘advise the public’ of “how the agency understands, and is likely to apply, its binding statutes and legislative rules.”
State leaders, agencies, and courts should not give deference to shadow guidance. Absent a clear understanding of how formal rules differ from sub-regulatory suggestions, however, state agencies and educational institutions rarely distinguish between the two. Governors and agency heads would do well to develop best practices regarding the review of federal guidance documents, all the more so because there may be a reason a particular policy has not been put forward as part of the APA’s notice-and-comment process.
Three ways states can play offense
Playing offense against the federal government essentially means being opportunistic on defense. Instead of just getting stops, states can score points. Three strategies for doing so are:
- Automatically defaulting to federal exceptions;
- Checking the flow of federal funds to school districts; and
- Applying post-Chevron best practices to state agencies.
President Ronald Reagan’s 1987 executive order on federalism states that “with respect to national policies administered by the States, the national government should grant the States the maximum administrative discretion possible.” States should take this recommendation to heart by defaulting, wherever possible, to federal exemptions that reduce regulatory burdens. For example, the federal Poultry Products Inspection Act allows states to offer certain exemptions to small-scale poultry farmers. Many other laws provide opportunities to expand state discretion regarding federal regulatory regimes.
A second strategy for state legislatures is to foster more transparency over federal funding streams going to school districts. Thanks to the Bipartisan Safer Communities Act, Medicaid is a growing revenue source for schools. While these Medicaid-funded services are technically under the state Medicaid program, few lawmakers know who is providing these services or how much money school districts are receiving. Another major source of funding for schools is federal child nutrition programs. State lawmakers can encourage accountability by requiring school districts to report how much federal funding they are receiving and to identify the conditions of this funding. In turn, they should require specific legislative approval over such funding.
Finally, and most apropos to the post-Chevron landscape, is the need in many states to adopt regulatory best practices recently identified by the U.S. Supreme Court. The most important of these is to eliminate agency deference by state courts. Under what is called “Chevron deference,” federal courts gave broad scope to agency interpretations of statutes. This was struck down by the U.S. Supreme Court in the Loper Bright (2024) decision. But Chevron is still the standard for many state courts. In other states, case law has moved away from Chevron, but codifying the “de novo” standard of review is preferable.
In addition to eliminating Chevron (and Auer) deference, states should codify two other 2024 Supreme Court victories: Corner Post and Jarkesy. Corner Post resets the clock for challenges to federal administrative actions. The new standard applies to the day an action or rule injures a regulated entity, instead of the day the regulation was issued by the agency. Jarkesy gives citizens their day in court: that is, the Seventh Amendment protected right to a jury trial as regards a questionable administrative penalty. Again, state legislation is necessary so that these best practices can be applied to state courts and agencies.
The federalism ideas mentioned here are not exhaustive. States can track federal funds and identify strings attached. They can develop contingency plans in the event that the Department of Education or Occupational Safety and Health Administration (OSHA) is downsized or closed. The REINS Act is another good idea. With Chevron in the rearview mirror and a friendly administration in office, federalism wins are more possible now than ever. To paraphrase Chief Justice Roberts, “The states are still separate and independent sovereigns. They have a final opportunity to act like it.”
Editor’s Note: This is Part 2 of the series which appeared in American Habits. Part 1 of this this three-part series urged federal courts to abandon agency deference altogether. The final article will look at Congress’ opportunity to govern post-Chevron.
