With conservatives losing the presidency and democrats controlling congress, we are likely to see a significant redeployment of conservative political energy into the states. There are still 33 state governments where Republicans control either a governorship or a legislative chamber, and other state political bodies are still controlled by conservative Democrats.
We are already seeing rightwing forces shift to state level policy campaigns. In fact, multiple conservative commentators have begun to openly discuss that the states will be their key target in the next few years. William Kristol, editor of The Weekly Standard and considered one of the key intellectual leaders of the neoconservatives, recently wrote  that conservative resurgence will start in the states: any “comeback will surely be successful practical governance at the state level.” Peggy Noonan, a speechwriter for the first President Bush, wrote  in the Wall Street Journal that “I believe renewal and reform will come from the states” and “the new emerging Republicans are likely to come in the end from the states.”
One example of this renewed focus on local politics is the recently launched “American Solutions ” organization, started by Newt Gingrich. The organization's goal is to mobilize the “513,000 elected officials in America, from school board to city council to county commission to state legislature.” Gingrich is in many ways returning to his original path in rising to power as Speaker of the House of Representatives, which began with his leadership of GOPAC  - an organization dedicated to training state leaders and winning control of state governments - and successfully fueled rightwing power across the country.
With the recent loss of federal power, we will no doubt see conservative leaders at the state level launching local attacks on immigration, gay rights and other issues as a wedge to win local power and to undermine support for federal progressive policy in the media.
Progressive leaders nationally and locally need to take this conservative focus on local politics seriously. Progressives need to be proactive and build a “collaborative federalism” that reinforces progressive policy not just in D.C. but in statehouses across the nation. This Dispatch details why state policy will remain central to national policy debates, how New Deal and Great Society progressive leaders made strengthening progressive power in the states a central focus of their work, and what a progressive collaborative federalism policy would entail for the incoming President and Congress.
States Will Remain Central to Policy in New Era
As we described last year in our Why States Matter  Dispatch, most pundits and analysts underestimate the dominant role states have played and continue to play in much of domestic policy.
States’ Dominance of Domestic Spending: In total, states spend over $2 trillion each year on a range of programs - almost three times the dollar amount of non-social security domestic programs administered at the federal level (see chart to the left). Critical programs like Medicaid, worker's compensation, public schools, unemployment insurance, most of our criminal justice system, and most aid to the poor are administered not from D.C. but in the states. For example, Indiana, Michigan, New York, Ohio  and South Carolina have insolvent unemployment insurance funds  and will have to borrow money from the federal government because due to increased unemployment numbers, more money is going out than is coming in from business taxes.
The public employees who actually do government work day-to-day, such as school teachers, cops and program case workers, are overwhelmingly employed at the state and local level. State and local governments employ 18.6 million people - over nine times as many as the federal government - which employs just over two million public employees.
Regulatory Power at the State Level: As we described in our 2006 report, Governing the Nation from the Statehouses , conservative leaders have long understood that even without control in Washington, D.C., states have key regulatory power over the economy and society beyond their budgets and spending power:
- Contracts and Corporate Accountability: Through state law and liability rules, the states regulate trillions of dollars of commerce in the economy. State courts reported 17 million civil cases in 2003, including contract, tort and real property disputes.
- Criminal Justice: While there were 170,535 federal prisoners in 2004, this is dwarfed by the 1.9 million prisoners in state and local prisons and jails.
- Public Pension Funds: While D.C. is debating whether to take equity stakes in private companies, state public pension funds control well over $2 trillion in financial assets.
- Employment Rights: While the media focus remains on the application of federal civil rights or labor laws, these only protect employment relative to a baseline of job protections determined by state law.
Strengthening Progressive Power in the States Central to New Deal and Great Society Goals
In some cases, as described in our 2006 Governing the Nation from the Statehouses  report, state regulatory power has been used for rightwing purposes, while in others it has strengthened long-term progressive goals. As progressives in D.C. assess their priorities, they should recognize that one of their longest enduring legacies would be to strengthen progressive power in the states, a legacy that will last if or when progressive dominance at the federal level might yield in the future to conservative opposition.
New Deal and Great Society Strengthened Collaborative Federalism: Despite some conservative myth-making, the period before the New Deal was not some heyday of “state rights” and decentralized power in America. In fact, the federal courts rather ruthlessly struck down state law after state law as overridden by federal power under the Constitution or by existing federal statutes.
David Walker in his book The Rebirth of Federalism  describes how under the New Deal, instead of perpetual conflict between federal and state powers, the nation saw the rise of a cooperative federalism where federal and state governments shared many responsibilities in a collaborative system. The New Deal Supreme Court not only expanded regulatory authority for the federal government, it specifically empowered states to act in areas like the minimum wage and child labor, and was far more willing to allow states to regulate in areas where the federal government was also taking action. Additionally, despite an increased proportion of spending by the federal government, the majority of domestic spending remained at the state and local level. And as highlighted above, much of this increased federal spending was devoted to direct aid to the states, deepening the collaborative nature of spending in more and more functions of government.
Even as New Deal strength ebbed in the 1950s, this increased power exercised in the states allowed new progressive coalitions to emerge in multiple states, enacting civil rights laws, electoral reforms and other progressive policies that would presage the rise of the Great Society in the 1960s.
In turn, a large focus of the Great Society was on strengthening the tools for progressive governance in the states. Grant-in-aid programs from D.C. to the states increased 68% in real dollars between 1964 and 1968, with a fairer distribution of dollars that reflected the population of each region receiving aid. On the legal front, civil rights laws and the “one person, one vote" decision expanded grassroots democratic power and strengthened progressive mobilization in states across the country.
By the 1970s, reformed state governments were increasingly seen as drivers of innovation in policy, with progressive consumer, environmental and workers' rights movements flourishing at the state level even after the Reagan era began. While federal commitments to social justice would recede with Reagan’s election, states could still take advantage of ongoing federal grant programs embodied in Great Society policies such as Medicaid to promote progressive innovation at the state level.
Battles Over State Policy Critical in Shaping Progressive Comeback Nationally
It is worth considering that the present national comeback of progressives in D.C. was built on successful state campaigns made possible by the legacy of past progressive eras that strengthened the power of progressives at the state level:
- State campaigns for the minimum wage became a key arena for progressives to emphasize fair wages as a “values” issue that can rally supporters. The rise in the federal minimum wage rate was driven by state after state leading the way in raising their own minimum wage. And even when the federal rate rises to $7.25 per hour next year, eleven states plus the District of Columbia, covering 26% of the U.S. population, will still have a minimum wage rate higher than the federal level.
- Similarly, universal health care was put back on the national agenda after demonstrated state-level successes, such as the Illinois AllKids program to provide health coverage to all children and debates on more comprehensive coverage programs in states from Massachusetts to the proposed Healthy Wisconsin initiative.
- And while federal legislators were gridlocked on debates over climate change, states in New England have already started a “cap-and-trade” auction to limit climate change emissions with other state regions beginning to join them.
These examples all served to contrast the potency of progressive problem-solving versus conservative federal inaction on critical issues as we approached the 2008 election. While there is now great hope for escaping the perpetual political gridlock at the federal level, the states will continue to serve as incubators of new policies and a check on future inaction at the national level long into the future.
Danger of federal preemption: Despite their “states' rights” rhetoric, conservatives at the federal level have increasingly recognized this emerging progressive power in the states and have sought to limit or flat-out block state authority to protect consumers, workers or the environment at the state level. A 2006 Congressional report  found that the U.S. House and Senate voted 57 times in the previous five years to preempt state laws, limiting state action on air pollution, contaminated food and Internet "spam."
Even without new federal laws, industries have used executive branch regulations to strike down state consumer protections. As we detailed  in 2007, the effects of such federal preemption can be profound. As predatory lending expanded across the country, states sought to enact laws to limit such abusive subprime mortgage practices, only to see many of those laws blocked by federal courts based on Bush administration claims they were preempted by federal law. Preemption arguably cost the U.S. economy the trillions of dollars lost in a subprime meltdown that might have been prevented if states had been allowed to lead on a crisis they recognized far earlier than federal officials.
Reversing this rising tide of preemption of state policy should be a priority for incoming federal officials.
What the Feds Can Do to Strengthen Collaborative Federalism
State leaders and advocates need to reinforce the message that any new era of progressive governance in America needs to focus not just on immediate solutions to problems we face, however crucial they are, but also on strengthening the power of communities and states to solve problems in the future in a progressive manner. Elements of such a federal program would include:
- A revitalization of revenue sharing, including a stimulus funding critical state initiatives: With states reeling from lost revenue due to the escalating recession, it is critical for federal officials to recognize the key role of states in funding essential programs, from education to transportation to health care to public safety, and that a key progressive federal goal must be bolstering the revenue of states. Any immediate stimulus will fail if expanded federal funding is just counterbalanced by spending cuts at the state level, so aid to the states should be part of a balanced economic rescue package. Beyond that, the federal government should systematically restore federal revenue sharing in order to bolster funding for priorities shared by all states, allowing consistent federal revenues to complement local revenue sources that wax and wane based on local economic conditions. Additional federal revenue sharing is especially critical in addressing the problem of unfunded federal mandates.
- Structuring federal policies to promote innovation at the state and local level: Health care, education, public safety, labor rights, consumer protection, civil rights and a host of other programs inherently involve collaboration between officials and institutions at both the federal and state level. We need to move away from the situation we saw when states were trying to expand health care coverage for children and their parents under the framework of the SCHIP program only to see federal policy limit both funding and flexibility of states in implementing policy. Instead, new federal legislation and regulations should be informed by what has worked in the states and strengthen the ability of state and local governments to innovate in achieving new policy goals promoted at the federal level. Progressive federal policy should ideally provide both adequate funding and a level playing field of regulation within which states and municipalities can customize implementation to serve the particular needs of their communities.
- Limiting preemption of state and local policy: One critical change progressives should make at the federal level is an end to the increasingly routine preemption of state and local policy. Congress has passed dozens of laws this past decade which have restricted the ability of state governments to protect consumer safety, defend labor rights, or stop corporate abuses. This is on top of President Bush and increasingly conservative courts reinterpreting previously enacted laws to shut down progressive state policies, most notably the gutting of predatory lending laws that protect against abuses in the mortgage industry. Progressive federal leaders should commit to promoting federal policy that acts as a floor for regulation, while allowing states and local governments to provide additional consumer, health, environmental and labor protections on behalf of working families. Both the president and congress should explicitly limit preemption to cases where state and local laws conflict with federal law, not just to where states have enacted policy in an area related to federal policy.
This new collaborative federalism compact needs to involve more systematic consultation with state leaders and locally-based organizations on federal legislation affecting state and local powers. Especially in a time when we need all institutions working together to revive the national economy, creating a new collaborative federalism needs to be a priority to sustain any new progressive era.
William Kristol, Weekly Standard - "Beyond Doom & Gloom: On the governors, Sarah Palin, and challenges ahead"
Progressive States Network - Governing the Nation from the Statehouses
Progressive States Network - Why States Matter 
David Walker - The Rebirth of Federalism 
Progressive States Network - Predatory Lending Bubble: How the Feds Preempted State Law
U.S. House, Minority Staff of Government Reform Committee - "Congressional Preemption of State Laws and Regulations "