The Rise of Competitive Federalism

Abstract

This article challenges the prevailing view of increasing political and fiscal centralization in the federal government. Since 1978, the authors argue, the nation has entered a new era of “Competitive Federalism” with federal, state and local governments locked in a competitive struggle for taxpayer resources and support. The new era has emerged largely because of the loss of the tremendous fiscal advantage held by the federal government during its centralization period, 1929 to 1978. Although “deregulated” and free to move into any area of domestic policy, the federal government is constrained by necessary budget pressures and a “reformed” income tax structure. Competitive Federalism has emerged as a new balancing force between Washington, D.C. and the fifty state‐local governments and will govern the federal system for the foreseeable future.