In the US system of government, the federal government has shifted its empahasis toward becoming a pass-through device for money: it passes through funds to individual through Social Security and various safety net programs; it passes through money to the health care industry through Medicare and Medicaid; it passes through money in the form of interest payments to those who loaned money to the government by purchasing Treasury securities; and it passes through money to state and local government. (About one-fifth of all federal spending goes to state and local governments; about one-third of state revenues come from the federal government.)
But while much of the public attention to government focuses on the federal level, many activities of “government” actually happen at the state and local level: for example, K-12 schools and public higher education, roads and bridges, public transit, airports, water and sewage treatment, policing and traffic rules, firefighters, housing policy, homelessness, regulating the production and transmission of electrical power, regulating insurance companies, direct administration of programs like Medicaid and unemployment insurance, and others. The overwhelming majority of “government” workers in the US are employed by state and local governments, not by the federal govermment.
To what extent do state and local governments have the capacity to handle the tasks they face? David Schleicher and Nicholas Bagley tackle this question in “The State Capacity Crisis” (Niskanen Center, January 1, 2025). They write: “The old joke is that the federal government is really an insurance company with an army. It doles out checks for old people through Social Security and Medicare, but does not much involve itself in service provision.” Here’s a flavor of their argument (footnotes omitted):
Three areas are of particular concern to us. First, the linchpin of the usual story about the lack of state capacity is the claim that Congress is broken. … State legislatures, however, aren’t broken in the same way that Congress is. Polarization notwithstanding, in 39 out of 50 states, both houses of legislatures and the governor come from the same party and only rarely have institutional limits like the filibuster. As a result, majority parties can usually do what they want. Gridlock is not the problem. Yet state legislatures are in an even worse spot than Congress. Voters know almost nothing about what is happening in state politics, and increasingly vote for the same party for state legislature that they do for president and Congress. This pervasive nationalization of state and local elections means that state legislative performance has little connection to electoral outcomes. Gerrymandering is also a much worse problem at the state level than at the federal level .. as is the lack of staff capacity and resources. The natural consequence is inattention to genuine public priorities.
Second, a key plank of the state capacity literature is that administrative law imposes too many procedural rules on government agencies. However well-intentioned, these rules bog agencies down in often-senseless red tape, augment the power of narrow interest groups to twist agency outcomes to private ends, and license courts to halt agency action for ticky-tack or partisan reasons. But while this “procedure fetish” is a big problem for the federal administration … it is in many ways a bigger problem for states and localities. State administrative law is as strict, and often stricter, than federal administrative law, both with respect to the procedures it imposes and the intensity of judicial review. State and, in particular, local governments have extremely powerful rules requiring lots of public participation in administration. Because small groups with members that care intensely about state and local decisions are much easier to form than groups representing a diffuse public interest, unrepresentative private interests—whether that’s the Chamber of Commerce or neighborhood NIMBYs—overwhelm administrative process at the expense of majoritarian preferences.
Third, there’s a blind spot in the state capacity literature about budgets. The reason is that the federal government has extraordinary fiscal capacity, including the ability to deficit-spend during recessions. … The picture looks very different at the state level. Every state (save Vermont) is legally required to balance its budget, no state can print money to inflate away its deficits, and all states face both legal and market limits on their capacity to borrow. When a recession depletes tax revenue, states have few choices except to increase taxes or reduce spending—right when public services are needed most. States’ limited fiscal capacity thus contributes mightily to poor governance, especially during recessions. Budget constraints are becoming increasingly salient as Medicaid consumes ever-larger fractions of state budgets, the costs of state and local public services increase faster than inflation, and states and localities deal with the consequences of underfunding their pension obligations.
Taken together, these forces—the unaccountability of state and local politics, the excessive strictures of state and local administrative law, and the sharp limits on state fiscal powers—dull officials’ incentives to govern well, privilege narrow interest groups at the expense of the majority, and frustrate efforts to build capacity.
In short, your state and local government are not run by the federal government. If you care about the practical side of state and local government actually getting things done, and in a timely and cost-effective manner, then you need to pay attention to the practicalities of what happening and vote accordingly. A classic example here would be the heavily Democratic New York City electorate sometimes voting for Republican mayors like Rudolph Giuliani or Michael Bloomberg. (If you react to those names based on their actions in the federal political arena, rather than their performance and actions in local government, you are illustrating the problem.)
Personally, I wince every time I hear state or local policymakers taking a stance on what’s happening at the federal level, because to me, it suggest that they are not focused on their actual jobs. When the streets are safe and in good repair, the K-12 schools are educating students at a high level, and the public pension funds are all well-financed, then I’m willing to hear the opinions of state and local policymakers about national politics–but not before then. Schleicher and Bagley conclude:
Whatever the right approach may be, our point is that reformers seeking to build state capacity need to think about where to concentrate their efforts. In our view, you won’t make that much headway in the Beltway. You need to go to Lansing and Hartford, Sacramento and Austin, Los Angeles County and New York City. State capacity—in America at least—is about states and localities.
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