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New Federalism (Reagan)

Last Updated: 2006

President Ronald Reagan’s proposals to reform the United States’ federal system differed significantly from the federalism proposals of his predecessors, were not all successfully adopted and implemented, but have, nonetheless, profoundly altered the United States’ federal system. In contrast to President Lyndon B. Johnson’s and Richard Nixon’s federalism proposals that partnered the federal and state governments in creative ways to accomplish policy objectives, President Reagan claimed that federal and state government responsibilities should be separated. Reagan found a public receptive to his ideas, and used Congress and executive orders to implement many of his federalism reforms, but many more of his proposals failed after confronting practical politics, specific programs, and active interest groups.

For the type of federalism called New Federalism (Reagan) to distinguish it from Nixon’s New Federalism, Reagan campaigned and sought to govern on the platform that “the most important cause of our . . . problems has been the government itself.” Reagan thought that the best way to redress this problem was to return responsibility for many domestic policies to the states. Returning responsibility for domestic policies to state governments, he suggested, would give the states greater discretion in crafting and implementing the policies, require less federal monetary assistance, and reduce the need for federal regulations and oversight. Reagan set an ambitious agenda. He proposed shifting responsibility for some programs to the states, eliminating the Departments of Education and Energy, redesigning federal fiscal policy with tax cuts, reducing federal monetary support for social programs, and reducing the number of federal employees and federal regulations. By separating and reassigning federal and state policy responsibilities, Reagan’s New Federalism resembled dual federalism more than the ;creative federalism of the previous decades.

President Reagan’s proposals received mixed reactions. His ideas both captured and stimulated growing public opposition to big government, big business, and big labor, and prescribed a solution that appeared consistent with the ideas of the United States’ Founding Fathers. Opponents claimed that Reagan’s federalism proposals were not intended to shift responsibility for the programs to the states, but to kill the programs outright.

President Reagan’s most expansive federalism proposal came in 1981 when he offered the states a trade. Known as the swap and turnback proposal, Reagan proposed assigning the federal government full responsibility for Medicaid if the states would assume full responsibility for the two programs most commonly associated with welfare—Aid to Families with Dependent Children and food stamps. The turnback involved returning forty-five categorical grant programs to the states with a gradual phasing-out of federal funding. Realizing that Congress would reject the proposal without significant outside support, President Reagan tried to convince the nation’s governors to support his proposal. Few governors supported the proposal, as most feared getting stuck with a hefty bill. In the end, Reagan’s proposal ended with a limited consolidation of several social programs into large block grants. As the cost of Medicaid escalated over that decade, many governors longingly wished they had supported Reagan’s proposal.

Reagan’s record on federalism is mixed. Congress implemented some of his proposals, including consolidating categorical grants into block grants. He also signed a number of executive orders promoting federalism, including one that enhanced state and local governments’ ability to influence the writing of federal regulations, and another that established the criteria that federal departments and agencies must follow when creating preemptive regulations. The Reagan administration, however, abandoned its federalism principles when they contradicted other policy objectives. In an effort to revive the economy, Reagan silently supported a number of preemptions that restricted state discretion over banking, communication, and transportation industries. He also signed bills containing crossover sanctions, including one bill that deprived states of federal highway funds if the state refused to raise the minimum alcoholic purchase and drinking age to 21. Reagan told a group of state legislatures that his administration was “committed—heart and soul—to the broad principles of American federalism.” Those broad principles often failed, however, when they were confronted by specific issues, interests, and objectives.

Yet, Reagan’s federalism ideas and policy successes have had a lasting influence on American government. Donald Kettl wrote in 2004, “[Reagan] tore down a wall every bit as imposing as the Berlin wall. When it comes to relations between the states and Washington, the Reagan era is still going on” (Kettle 2004, 14). Presidential scholar Stephen Skowronek (1993) designates Ronald Reagan as one of those rare presidents who establishes a new policy “regime,” and Skowronek’s “Reagan cycle” is the dominant leadership paradigm currently framing American politics. Included in the Reagan policy agenda were a conservative fiscal policy, a hawkish foreign policy, and a devolutionary federalist domestic policy.

The Reagan record is important given an increase in direct interaction between federal and local governments during the period following the New Deal. So we are presented with a paradox in Reagan-era federalism, the rhetorical advocacy of devolution and stronger state-centered federalism with a system that is substantively interconnected, complex, and generally featuring shared if not blurred policy authority across levels of government.

The Reagan administration attempted to reverse the role of the federal government with New Federalism and, in so doing, reverse the trend of unfunded mandates, preemptions, and co-options. Though Reagan did not accomplish his complete devolution agenda, at the end of his two terms he succeeded in raising federalism again as a core question of American politics.

SEE ALSO: BankingBlock GrantsCategorical GrantsConnecticut CompromiseConstitutional Convention of 1787Creative FederalismCrossover SanctionsDevolutionEducationExecutive OrdersGovernors and FederalismJohnson, Lyndon B.MandatesMedicaidNew DealNew Federalism (Nixon)Reagan, RonaldState GovernmentState LegislaturesTransportation PolicyVirginia PlanWelfare Policy


Timothy Conlan, From New Federalism to Devolution (Washington, DC: Brookings Institution Press, 1998); Charles O. Jones, ed., The Reagan Legacy: Promise and Performance (Chatham, NJ: Chatham House Publishers, 1988); Donald F. Kettle, “Potomac Chronicle,” Governing (August 2004): 14; Stephen Skowronek, The Politics Presidents Make (Cambridge, MA: Belknap Press of Harvard University, 1993); and Joseph F. Zimmerman, Contemporary American Federalism (Westport, CT: Praeger, 1992).