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Federalism – the division of sovereign authority among three separate levels of government (local, state and national) – is a distinctive feature of American democracy. The interplay between the three levels has profoundly shaped our country’s political, economic and social development.

During the 19^th Century, progressive democrats like Jefferson and Jackson regarded the states as bulwarks of individual liberty, free enterprise and popular sovereignty. They resisted conservative attempts to establish a European-style central government, which they feared would be dominated by economic privilege.

Around the turn of the 20^th century, however, the party they founded reversed course. Democrats increasingly saw centralizing political power in Washington as essential to tempering the social disruptions of industrialization, countering the growing economic power of corporations, and defending America in a dangerous world.

Now, in the 21^st century, many progressives are questioning whether aggregating more power and resources in Washington is still the best way to achieve their ends. A key reason is that, with the federal government stalemated by extreme polarization, fiscal deadlock and bureaucratic bloat, the political initiative in America is increasingly shifting to other levels of government, especially to local and metro leaders.

Progressives and National Power

During the 20^th Century, U.S. progressives helped to catalyze three great waves of political centralization:

The Progressive Era – As the century dawned, reformers in both parties warned that powerful new forces – industrialization, urbanization and the concentration of economic power in giant monopolies – were overwhelming the capacities of state governments. Woodrow Wilson orchestrated a remarkable flurry of progressive legislation that included the federal income tax, the Federal Reserve System, national child labor laws and tougher anti-trust regulations. Progressives also pushed successfully to increase popular participation in government, through primaries, referenda and initiatives, and direct election of U.S. Senators.

The New Deal – During the Depression, FDR promised “bold, persistent experimentation” to deal with the nation’s worst economic calamity. His New Deal expanded the scope of federal power dramatically, by launching huge public works and relief programs; regulating prices and wages; nationalizing income support and labor protections; establishing Social Security; and, multiplying federal agencies staffed by a new breed of college-educated technocrats. Washington also replaced laissez faire with Keynesian spending designed to manage the business cycle.

The Great Society – The nationalizing impulse intensified after World War II, reaching its peak in LBJ’s Great Society. This period of expansive liberalism saw the federal government assume responsibility for problems that had previously been left mainly to states and local authorities: racial injustice, poverty, illness, gender inequality, urban decay, educational inequity and pollution. Proliferating mandates and regulations vastly extended Washington’s reach and often made state and local governments seem like subsidiary arms of the federal government.

The assumption that underlay each of these waves – that nationalizing policy would best serve progressive purposes – was very often true. No one wants to go back to a time when giant monopolies crushed competition and bought state legislatures; when the doctrine of “states’ rights” sanctioned racial subordination; or when industries produced unsafe food and polluted our air and water with impunity.

But we live in a different world. Power today flows out of Washington. Urban America – centers of economic and social dysfunction a generation ago – has now become the nation’s prime catalyst for innovation. Brookings Institution scholars Bruce Katz and Jenifer Bradley have aptly dubbed this upsurge of local initiative and creativity the “metro revolution.” This phenomenon illustrates one of the great advantages of America’s flexible federalism: If one level of government stops working, the locus of public problem-solving shifts elsewhere.

The Progressive Policy Institute (PPI) believes it is time to rethink the default assumption of progressive federalism as we’ve know it – that the arrow of progress always points toward centralizing power. Here are five reasons to think the arrow now points the other way:

First and most obvious is the political impasse in Washington. The inability of our national leaders to forge consensus or compromise, especially on the biggest challenges facing the country, has given rise to a new truism: the more dogmatic and polarized our politics, the less productive our government. That’s why political leaders who want to get things done are increasingly drawn to local government instead of Washington, where lawmakers are turning into fundraisers.

Second is the cratering of public confidence in the federal government. Most Americans don’t trust Washington to do the right thing most of the time. This lack of confidence in the means by which progressives propose to solve the nation’s problems and help people get ahead is a huge obstacle. In contrast, 72% of Americans trust their local governments, making them more promising terrain for public activism.

Third, the federal government has lost its fiscal freedom. Today the cost of maintaining the government’s cumulative commitments exceeds expected tax revenues. With “mandatory” spending on entitlements relentlessly squeezing out space for new investments, U.S. officials in effect have slapped fiscal handcuffs on themselves. That squeeze will only intensify as America gets older. Says Emmanuel, “We’ve always said there’d be a day when all the federal government does is debt service, entitlements and defense. Well folks, that day is here.”

Fourth, after four generations of nationalizing policy, Washington really has gotten too big, too bureaucratic and too rule-bound. The federal government is mired in the sludge of duplicative, overlapping and outdated laws and regulations that have accumulated over decades. Saddled with industrial-era bureaucracies and colonized by powerful interest groups, the vast federal establishment today is better at protecting the programmatic status quo than at sparking progressive change.

Fifth, digital technology, networks and globalization have combined to attenuate Washington’s ability to manage the national economy so that it delivers mass prosperity. Even as they create an increasingly integrated global economy, these forces also seem to be driving political fragmentation around the world. The great sociologist Daniel Bell captured this dynamic nearly three decades ago:

The common problem, I believe, is this: the nation-state is becoming too small for the big problems of life, and too big for the small problems of life. It is too small for the big problems because there are no effective international mechanisms to deal with such things as capital flows, commodity imbalances, the loss of jobs, and the several demographic tidal waves that will be developing in the next twenty years. It is too big for the small problems because the flow of power to a national political center means that the center becomes increasingly unresponsive to the variety and diversity of local needs.

         In short, there is a mismatch of scale.

Today’s borderless economy is organized around vibrant metro regions, not nation-states. U.S. metros today are making the key investments – in innovation, modern infrastructure and human capital – that are renewing our economy’s dynamism and ability to provide broadly shared prosperity. They are developing their unique assets and comparative advantages to find niches in the emerging global knowledge economy. What they need from Washington is not standardized, one-size-fits all policies that are oblivious to local realities, but the flexibility and resources to tackle the nation’s problems from the ground up.

For all these reasons, it’s time to redefine federalism for the 21^st century. Instead of turning reflexively to Washington, progressives should push for a systematic decentralization of decisions and resources to the creative Mayors and metro leaders who are making local government an effective agent of economic and social progress.

This isn’t a matter of eviscerating the federal government, as many conservatives would like. Washington must continue to do the things it is best suited to do: set fiscal and monetary policy; invest in science and technology, infrastructure and career preparation; make the rules for immigration, environmental protection and other cross-border issues, and of course take the lead on diplomacy and defense.

Nor does progressive federalism mean a preference for states over Washington – in fact, metro leaders say state governments often put bigger obstacles in their way than the feds. The real question is, how can the states and the federal government enable and be better partners with local leaders? What practical steps should they take to empower metro leaders to do more of what they are already doing – spurring job and business creation; forging regional collaborations and public-private partnerships; unlocking private and civic investment in local infrastructure and housing; improving education and career training; making their communities healthier and safer; and, making local governments more efficient and responsive to the people they serve?