Federalism
The United States was formed in large part because of the promise of federalism--a situation where the states dominate over the federal government in most matters, including almost all domestic matters. This is because the 13 states feared a loss of sovereignty.
State leaders were unwilling to ratify a US Constitution if it did not provide for a slanted balance of power where most domestic power remained with the states. In Federalist #45, James Madison appealed to these leaders when he wrote:
"The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State." (1)
And, because the states were meant to dominate over the federal government domestically, Madison hinted that the states would tax and spend more--that the states, together, would have a bigger budget than the federal government:
"If the federal government is to have collectors of revenue, the State governments will have theirs also. And as those of the former will be principally on the seacoast, and not very numerous, whilst those of the latter will be spread over the face of the country, and will be very numerous, the advantage in this view also lies on the same side." (1)
Madison also argued that the number of public officials in 13 states would be at least 30 times the number of federal officials--so that an average state, viewed alone, would have over twice as many officials as found in the entire federal government.
The bureaucracy of an average state would then be equivalent to that of 2.3 "federal governments" in size.
These arguments helped to get the US Constitution ratified. The federal government expenditure (2), in relation to that of the state governments (3), remained small until FDR's New Deal in the 1930s.
In 1930, federal expenditure was only half of the combined expenditures of all state and local governments. In 1937, after New Deal legislation took effect, the federal expenditures reached the level of the state/local expenditures.
From 1938 forward, the federal expenditure grew in relation to state/local expenditures, so that by 2016 it had risen to 155% of the combined spending of all of the states and localities. This represents a loss of federalism in the US.
It would be healthier to restore the lost federalism which had been promised.
One possibility would be to return to the 10-year (averaged) spending patterns of the decade from 1929 to 1938, when state/local governments spent less than 9% of GDP (4) and the federal government spent less than 80% of the expenditure of the state governments (less than 7% of GDP).
Even without a reduction in state/local expenditures from where they are today (~14% of GDP), an amendment to the US Constitution could still limit or "cap" our federal spending each year to 80% of the average of the previous 3 years of spending by the state/local governments.
This amendment, if discussed and eventually ratified, might be of tremendous benefit to the future of the nation. It would restore a lost promise which had been originally kept for more than a century after the founding of the nation, and put the US back onto a steep growth trajectory.
Reference:
(1) Federalist #45 can be viewed online at: http://avalon.law.yale.edu/18th_century/fed45.asp
(2) U.S. Bureau of Economic Analysis, Federal Government Current Expenditures [AFEXPND], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/AFEXPND, September 26, 2018.
(3) U.S. Bureau of Economic Analysis, State and Local Government Current Expenditures [ASLEXPND], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/ASLEXPND, September 26, 2018.
(4) U.S. Bureau of Economic Analysis, Gross Domestic Product [GDPA], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/GDPA, September 26, 2018.
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