What Manufacturers Need To Do Amid New Millennium Federalism
by Robert L. Guyer, Esq.


Leadership in legislative and regulatory domestic matters has shifted from Washington to the state capitols. Federal devolution, the incremental return of domestic authority by the federal government to the states, plays a part. But the greater part is played by the states themselves having more money, professionalism, credibility and, most of all, more leadership ambition than they have had in the last 50 years. Today, federalism increasingly is characterized by two sovereigns: the states for domestic matters and the national government for the interstate and international. To deal with the shift that new millennium federalism brings, manufacturers need to become more active with state legislatures and regulatory agencies.

The Resurgence of State Regulatory Authority

With Presidents’ Roosevelt’s New Deal, Kennedy’s New Frontier, and Johnson’s Great Society, the federal government expropriated unto itself a measure of domestic supremacy previously unimagined. U.S. Supreme Court Justice Lewis F. Powell stated that the Court rejected 200 years of federalism to propound "an unprecedented view that Congress is free . . . to assume a State’s traditional sovereign power."

Ronald Reagan began an era of reversing super-federalism in the direction of what he held to be the U.S. Constitution’s framers’ original concept of two sovereigns, one state and one federal, each with its own sphere of supremacy. In the 12 years following Reagan, Congress transferred to the states federal authority and moneys, especially for social entitlement programs, and today is calling for even greater federal accountability in dealing with the states. The Supreme Court revived the 10th and 11th amendments that reserve to the states powers not delegated to the federal government. And, President Clinton lightened the hand of federal agencies on the states by signing executive orders that require the agencies, wherever possible, to defer the establishment of standards to the states.

New millennium federalism is also defined by a shift of resources and focus. Over the last ten years, the federal government has down sized by 300,000 civilian employees, while state and local government employment has increased by 1.1 million. In addition, state and local government purchases have exceeded those of the federal government for the last few years. Today, states have the organizations, technical expertise, and funding to assume a greatly expanded measure of domestic authority.

As Washington increasingly shifts more of its attention to global matters, the federal government needs the states to assume more of the domestic burden to free up federal resources. One indicator of Washington’s expanding global emphasis is the number of Washington lobbyists is expected to triple over the next 10 years, most of them working on international matters.

What's a Manufacturer To Do?

Amidst new millennium federalism, industry finds some comfort in the potential of using federal preemption of state authority. The United States Environmental Protection Agency’s dismissal of the recommendations of the states’ Ozone Transport Assessment Group, for example, demonstrates federal preemption remains very much alive, not withstanding devolution.

Industry, says scholar Pietro Nivola of the Brookings Institution, desires preemption because it would rather "have one 500-pound gorilla in charge . . . than to deal with 50 monkeys on steroids." However, the forces that make the new millennium federalism necessary in the first place, simultaneously lessen the chances that federal preemption will be a regularly available solution. President Clinton in executive order writes, "Preemption is permissible only when express in the law, there is evidence that Congress intended the Executive to have authority to preempt, or where exercise of state authority directly conflicts with federal authority under a federal law." While Washington will continue to have supreme domestic power, it will be used less in intrastate matters and preemption will remain an option, if less available.

Nivola’s description of the states being "on steroids" reflects they are already taking the lead on domestic matters. Tort reform, managed care, and utility deregulation are a few examples of where the states are running ahead of the federal dawdling that characterizes Washington. In other instances, such as regulation of cathode ray tubes, states are acting outside of their authority and "daring" Washington to act. And in matters such as waste reduction, the states are way ahead of the federal government. The federal government is choosing to allow the states to establish precedents and, in some cases such as regulation of waste batteries and lamps, Washington is following their precedents.

To effect the direction of the states, manufacturers must renew state government affairs programs and become more involved in state government related activities. This awareness is not lost on other groups who want to affect the same environment as manufacturers. For example, the National Audubon Society recently added state government affairs offices in 25 states.

For their part, the states recognize that a patchwork of differing laws will impede the national business climate and, consonant with state sovereignty, they want to avoid that outcome wherever possible. However, manufacturers must build a greater presence in the state houses and participate in agency workshops to ensure regulatory consistency among states and a favorable national business environment.

Corporate state government affairs offices must be strengthened or reborn. During the years of growing super-federalism, manufacturers and other special interest groups greatly expanded their corporate and national associations’ federal government affairs Washington offices, while corporate state government affairs offices waned or were even disbanded. In new millennium federalism, Washington offices will remain busy, but more with international rather than state matters.

State government affairs departments will need the help of state manufacturing associations to help carry the legislative and regulatory burden of 50 states, 190,000 state bills considered each biennium, and 8,500 state lawmakers. However, umbrella associations with diverse and broad memberships will not be able to represent manufacturers optimally. This will be especially so for contentious issues as utility deregulation, health care, and insurance which may pit corporate interests against one another. While membership in broad based organizations has collateral value, manufacturers' specific interests are best served by associations concentrating on manufacturers' issues. Summary

Domestic leadership has moved from Washington and now resides in the states. Although federal preemption remains an occasional tool for dealing with the states, to affect the national business environment in this new millennium, manufacturers will need greater state involvement than they have had in the recent past. This will require the dedication of resources to corporate state government affairs departments and state associations that specialize in their issues.
© 2000 Engineering THE LAW, Inc.

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