The purpose of part I is to demonstrate that the United States Constitution adumbrates a particular kind of federalism, which we have come to call competitive federalism. The point of departure is a constitutional moment in which individuals choose the rules that will govern their future interactions. If individuals in that position were to choose any federalism at all, they would choose competitive federalism, to the exclusion of alternative arrangements. To be sure, the Founders did not construe a Constitution in a state of nature or from a contrived original position; they were practical statesmen, not speculative philosophers. And they...

Tyranny is imposed; a constitution is chosen by people who agree to be governed in accordance with its rules. Classical liberal theory captured the distinction in the notion of a social contract that precedes, establishes, and legitimates institutional politics. Contemporary scholars distinguish between “constitutional” and “ordinary” politics; constitutional choice theorists in the tradition of James Buchanan and Gordon Tullock’s Calculus of Consent, between “precommitments” and “in-period” choices, and between (prospective) citizens’ “ex ante” and “opportunistic” preferences.¹

Constitutional theory of this description confronts the objection that constitutions cannot actually be chosen in any normatively compelling sense. David Hume, an author much...

“Reflection and choice,” precautions against the violence of faction, self-enforcing rules as a means to ensure political stability: to what extent do those tightly interwoven premises of competitive constitutionalism carry forward into federalism? Analytically, the answer is straightforward: let prospective citizens—not states—choose the arrangements. If they choose a federal arrangement, they will choose competitive federalism rules that promise to curb government surplus, and they will search for means of stabilizing that arrangement against both state and federal defection. The calculus of the United States Constitution, I will now show, conforms elegantly to this model.

Of course, the Constitution...

The preceding chapter has sketched a few of the Constitution’s distinctively competitive federalism arrangements—in particular, those that guarantee cross-border mobility. To show that the Constitution establishes an entire competitive order, this chapter stacks up the Constitution’s formal structure against the basic precepts of contemporary competitive federalism theory. The analysis is limited but also quite ambitious. As for limits, I put aside federalism’s “political safeguards”—that is, the states’ agency in federal political institutions. Those safeguards are best discussed, and will be discussed, in their actual operation over the centuries. I also put aside, for consideration in later chapters, several...

No federal constitutional order implements itself. Its elaboration—the translation of general constitutional commands into abstract-concrete norms that are capable of governing private and official conduct, its adaptation to changing economic and political circumstances—is a sustained work of construction, partly political and partly legal. That elaboration during the nineteenth century is the subject of Part II. No statesman or judge of that formative period consciously thought about “competition” as a constitutional or federalism principle. If the country nonetheless ended up with a fiercely competitive constitutional order, the explanation is not some ruse of competitive reason. Rather, the competitive federal...

Competitive federalism confronts two dangers: central interventions that destroy competition among states, and anticompetitive practices by junior governments (protectionism, exploitation, and balkanization). The constitutional design problem is to identify and stabilize a competitive equilibrium—put differently, to figure out a set of rules and arrangements that promises to minimize the joint costs of error on either side.

Although the problem can be traced throughout the constitutional architecture, one of its focal points is the Commerce Clause. On one side, the clause grants Congress the power to “regulate Commerce . . .among the several States.” On the other side, the...

The subject of this chapter is an oft-told but endlessly fascinating story: the rise of corporate capitalism in nineteenth-century America. In the early years of the Republic, a relative handful of corporations operated under special, single-issue state charters. Often, the charters conferred monopolistic privileges, and corporations’ operations were restricted to the chartering state. Corporate charters had the advantage of allowing the pooling of large sums of money (often for large infrastructure projects), and states competed with each other for capital in the national and international markets. But there was no state competition for corporate charters. A century later, corporations had...

Among the doctrines and cases covered in these chapters, none is more discredited than the “federal common law” of Swift v. Tyson (1842). Reduced to its essentials, the question in Swift was this: in “diversity” cases among parties from different states, what law are federal courts to apply when no federal statute or constitutional provision governs the dispute? Swift held that in certain “commercial” cases of this nature, federal courts should apply a federal general common law, largely independent of the common law decisions of individual state courts.

Swift and its progeny of hundreds of Supreme Court decisions were overruled...

Recall the fiscal federalism principles from chapter 3. Competitive federalism demands substantial fiscal and in particular tax autonomy for all levels of government, as well as a low level of intergovernmental fiscal transfers. Such an arrangement confronts a risk of unilateral defection, either by the central government (through the imposition of a tax monopoly) or by states (through taxes that exploit other states’ citizens); and bargaining risks, either in the form of federal tax-and-spend cartels, instituted in response to state demand, or of excessive state borrowing in expectation of a federal bailout. All four risks played a role in nineteenth...

To repeat: the conditions that sustained competitive federalism could not and did not last. Profound political, economic, and social changes—including the shift from a tariff to an income tax economy, the emergence of populist and Progressive social movements, and the expanded franchise—had potent effects on American federalism’s practice and constitutional understanding. Progressive theorists denounced the traditional constitutional understanding as hopelessly inadequate to the complexities of industrial capitalism and agitated for a “Living” Constitution more in keeping with the times and with popular demand.¹ Some three decades later, they got their wish. The Old Constitution disappeared, and a very...

The Constitution, I argued in chapters 1 and 2, embodies three precommitments: the citizens’ ex ante perspective (“reflection and choice”) as the constitutional baseline, safeguards against the violence of faction, and self-enforcing norms as a means of ensuring stability. These principles in turn translate into a competitive constitutional structure and federalism. The New Deal Constitution embodies just the opposite commitments. Its federalism reflects the interests of “states as states,” not of citizens. It seeks to unleash interest group politics, not to discipline them. And it eviscerates the Constitution’s self-enforcing, stabilizing mechanisms to make room for a more “democratic” Constitution. These...

The Commerce Clause territory, like Gaul, is divided into three parts: the scope of congressional power under the clause; the question of coordinating concurrent state and federal regulation, or federal preemption; and the dormant Commerce Clause. In all three areas, the New Deal Constitution accommodated the state demand for surplus-protective doctrines, with one important qualification.

The states’ preferred rule under competitive conditions, I have argued, is an all-encompassing federal commerce power. That construct is a central accomplishment of the New Deal revolution, marked by the transformation of the Commerce Clause from Hammer v. Dagenhart (1918) to Wickard v. Filburn (1942)....

Erie Railroad Co. v. Tompkins (1938) is one of the most central decisions, not just in the New Deal’s Constitution but in the entire history and architecture of American constitutional law. Justice Brandeis’s opinion, joined in toto by four other justices, declared that Swift v. Tyson and its progeny of hundreds of cases were not simply wrong but unconstitutional. Erie captured that holding in a famous dramatic formulation: “There is no federal general common law.”¹ Henceforth federal courts would in diversity cases cease to divine such a law and instead follow the rules, common law as well as statutory, of...

The New Deal’s fiscal instruments—federal tax credits, grants-in-aid, and conditional funding programs—embody the New Deal’s “cooperative federalism,” and they form the warp and woof of the American welfare state. Building on Progressive initiatives, the New Deal greatly expanded fiscal intergovernmentalism and entrenched it in the institutional architecture of American federalism. A federal inheritance tax, coupled with an offset of up to 80 percent for tax payments to states—was introduced in 1926. It served as a model for, among other things, the unemployment insurance title of the 1935 Social Security Act, which coupled a tax credit for employers...

Part III described the new deal constitution as an inversion of the constitutional order—from competition to cartel, from “the true welfare of the great body of the people” to the interests of “states as states”, from checks against factionalism to interest group mobilization, from constitutional commitments to democratic demands. In some areas, the baseline shift was almost instantaneous. Judicial scrutiny of federal “economic” legislation was officially abandoned in Carolene Products (1938). Hammer v. Dagenhart was overruled in United States v. Darby (1941). The enumerated powers doctrine was effectively declared dead in Wickard v. Filburn (1942). Lochner was so thoroughly...

This chapter examines federalism’s post–New Deal trajectory in the rights arena, where the Supreme Court aggressively expanded constitutional entitlements; the fiscal arena, which is characterized by a sustained expansion of cooperative federalism programs; and the regulatory arena, where we have witnessed a dramatic expansion of both federal and state authority. In terms of our conventional federalism debate, these developments seem discordant. Federalism’s balance swings now this way, now that; the Supreme Court’s stance vis-à-vis the states, from confident, centralizing activism (as with rights) to deference and decentralization (as with respect to states’ regulatory powers). However, the seemingly disparate tendencies gain...

The Constitution sought to contain the states’ factional propensities at the state borders. The New Deal Constitution pursues the opposite orientation of liberating factions, now called “interest groups,” to launch their schemes in the several states, as well as in Congress. In its original Brandeisian formulation, “experimentation” still came with the caveat that states should experiment “without risk to the rest of the country.” As suggested earlier, though, the qualification is not altogether coherent. If interest group politics is a good thing, federalism should allow states to experiment on other states’ citizens. The post–New Deal Court has accommodated that strategy...

Over the past generation, judicial federalism has taken some seemingly curious turns. Beginning in the late 1980s and with increasing determination thereafter, the Rehnquist Court embarked on a “federalism revolution” that was widely viewed as a fundamental challenge to the New Deal Constitution. Liberal scholars and advocates vehemently denounced the Court’s supposed resurrection of a pre–New Deal “Constitution in Exile” or even of an “antebellum” jurisprudence, while some conservatives placed high, perhaps equally fanciful hopes in the Court’s agenda.¹ The debate reached a crescendo circa 2000, when the Court’s conservative “Federalist Five” prevailed in a string of cases over enumerated...

Competitive federalism, I have argued, is the only federalism to which prospective citizens would precommit. The United States Constitution is best understood as embodying that precommitment. For all its compromises and imperfections, Part I showed, the Constitution’s central organizing principles reflect the ex ante calculations of individuals as distinct both from the calculations of “states as states” and from opportunistic interest group bargains. That singular, exceptional feature explains the Constitution’s option for competitive politics and political institutions, prominently including competitive federalism.

Constitutional government is not only design but also development and construction. Parts II through IV described the working out...

This chapter, as just advertised, addresses federalism’s vertical, federal-state dimension. I begin with the Supreme Court’s own role in this theater—that is, with the question of constitutional rights. The basic proposition is straightforward: competitive federalism would require the Supreme Court to repudiate its consociational rights agenda. Importantly, that program differs from an anti-“activist,” William-Brennan-in-reverse agenda in substance and in its general orientation. Its central objective is not to stop making up rights but to reconnect rights jurisprudence to the constitutional structure. A full elaboration of that agenda is beyond my scope and ambition; I shall simply suggest the possibility...

The New Deal Constitution methodically depleted the once-rich inventory of horizontal federalism norms. To that state-empowering, exploitation maximizing strategy, we owe the “polyphonic,” centrifugal tendencies of Our Federalism—cascading impositions on interstate commerce, the litigation explosion, the proliferation of semiautonomous power centers. Curbing those tendencies would require the Supreme Court to rediscover that there is such a thing as horizontal federalism and, moreover, that its maintenance requires some form of constitutional common law. This chapter sketches the contours of such a reconstruction in three long-familiar areas: “dormant” commerce, preemption, and federal common law.

The mere mention of those subjects suggests...

Our Federalism is “ours” in a tautological sense—but not in any other meaningful sense, especially a constitutional sense. Madison’s compound republic envisioned a federalism for citizens, not politicians. It put confidence in competitive politics and a self-enforcing structure, not rights; and it sought to contain factional politics, not to unleash it. Our federalism of rents, rights, and empowerment did have its advocates at the time—the Anti-Federalists. They lost, but enough of their heritage survived the Constitution to allow later generations to seize on it—not by changing the Constitution, which in a formal sense has become more competitive;...