States of Inequality: Fiscal Federalism, Unequal States, and Unequal People

The current system of federalism undermines the social and economic equality of the people of the United States. Although states have broad responsibilities to provide basic services, they have vastly different financial capacities. Some states are richer while others are poorer, and these differences have critical implications for the ability of states to meet the needs of their residents. Among developed federal nations, the United States alone does not seek to equalize resources among the states. The interstate disparities undermine the values commonly associated with federalism and have especially severe consequences for the realization of certain core commitments, such as education and health care. Focused on constitutional doctrine, scholars of federalism in the legal academy have largely ignored the significance of these interstate financial disparities. The growing attention to social and economic inequality, as evidenced by debates about the Affordable Care Act and proposals for “Medicare for All” and “College for All,” heightens the urgency of the issue.

These programs require substantial state funds. Unless policy-makers attend to the reality of interstate financial disparities, the plans will fail to achieve their goals and will instead exacerbate the current savage inequalities among the people of different states. After illustrating the impact of interstate inequality on education and health care, this Article argues for a new approach to federalism that seeks to mitigate these inequalities while continuing to promote the benefits of decentralization. The New Deal required a revolution in conceptions of federalism, empowering the national government and the states. The civil rights era reconstructed federalism on a foundation of political equality. Similarly, the protection of basic commitments to education, health care, and other critical areas requires a new understanding of the federal system. The fiscal disparity among states demands attention, not because states have inherent dignity, but because the inequality of states diminishes the dignity of their people.