Is Commonwealth Following Road to Federal Serfdom?

Milton Friedman, American economist, believed that "the Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy."

If you need any confirmation about how government can be mismanaged, look at its growth. Over the past decade, Congress doubled the national debt and super-sized the federal government with new programs and a deluge of spending. It invented bureaucracies out of whole cloth.

Voters reacted to this spending spree and sent many of the responsible parties home, including changing majorities in both houses of Congress. Now another 1,100-page act of Congress -- the American Recovery and Reinvestment Act of 2009, adopted on Feb. 13 -- drives an important question to the forefront of our state consciousness. If this economy is the worst America has experienced in a generation, with some pessimists asserting it is the worst since the Depression, then we must ask: What role has government played in effecting this new reality and what now is its proper and constitutional role?

To evaluate the so-called stimulus bill, we should turn to the Constitution, particularly the 10th Amendment: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

Case law expounded upon this fundamental principle of Federalism with respect to state sovereignty. Printz v. United States held that the federal system limits the ability of the federal government to use state governments as an instrument of the national government. But this traditional notion of federalism has devolved into "cooperative federalism," where Congress creates new state programs by affixing certain conditions to the receipt of funding. These coercive acts may become so intolerable that long-term sustainability is in real question, and the ultimate danger is the erosion of the principles of federalism whereby Virginia becomes, effectively, a ward of the federal super state.

As a result, over the past year, states around the country passed resolutions claiming sovereignty under the 10th Amendment and resolving to serve notice and to demand that the federal government cease and desist mandates that are beyond the scope of its constitutionally delegated powers. This movement demonstrates an imbalance and growing concern that the federal government is increasing its dominance over state policy affairs.

Enter the stimulus.

The American Recovery and Reinvestment Act's final version includes $787 billion in spending increases. The majority of the take is sent out through federal formulas and programs. Based on the initial report, Virginia stands to receive $4.5 billion over approximately two years. The lion's share of this welfare includes allocations to the State Fiscal Stabilization Fund, Medicaid, K-12 education, and "shovel-ready" transportation projects. Any discretion Virginia may have to reallocate funds is limited. The federal government's infamous "stringy legs" entangle many potential benefits and make decisions to prioritize appropriations more difficult. Several governors, not including ours, question whether to even accept federal stimulus money that comes with such strings attached.

To understand how complicated this act makes state budget matters, let's look at its education funds and the corresponding state requirements. To be eligible for funding, Virginia must make five commitments, including preserving funding at fiscal year 2006 levels; establishing a "longitudinal data system;" improving standards and assessments; and providing "assurances" that efforts are made to support "struggling schools."

The fifth requirement asks Virginia to "achieve equity in teacher distribution." You may ask what that means. Good question. Its two elements state that (1) Virginia will demonstrate action to improve teacher effectiveness in order to address any inequities in the distribution of highly qualified teachers between highand low-poverty schools; and (2) the state ensure that low-income and minority children are not taught at "higher rates than other children by inexperienced, unqualified, or out-of-field teachers."

Neither of these two elements provides any objective measure. Is this good management? State appropriators could become ensnared by such subjective formularies for distributing the taxpayers' money.

As the General Assembly session draws to a close this week, Senate and House budget negotiators plan to dissect the entirety of the recent federal action in the context of managing a nearly $4 billion shortfall. These legislators, who clearly make tough decisions, now may be compelled to accept stimulus money to fill revenue gaps -- but they do so with trepidation, for a philosophical issue looms about the continued growth of government and the emerging attack on the sovereign principles of federalism.

For more details about how this American Recovery and Reinvestment Act affects the commonwealth, visit http://www.stimuluswatch.org/.

Christopher Peace is a Republican who represents Virginia's 97th House of Delegates District, which includes parts of Caroline, Hanover, Henrico, King and Queen, King William, New Kent, and Spotsylvania counties. He may be contacted at DelCPeace@house.virginia.gov or (804) 698-1097.