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The 'New Federalism'

By Joseph C. Harsch / February 2, 1982



When I first became aware of such things (back around the year 1929) the textile mills of New England were moving south.

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Why did they move south?

Partly because labor in the South was not unionized, hence wages were very much lower.

Partly because labor, mostly black, was not yet politically franchised, hence there were few or none of the social security programs which had already pushed taxes in New England well above the levels of taxes in the South.

The shift was a boon to the South, but a disaster for New England. It left in New England a still higher tax burden on the fewer activities which could still operate profitably in the northeast.

New England could not export its new unemployed to the South in the wake of the lost textile mills because its newly unemployed preferred to stay where social benefits including education were high. Besides, they with their high wage standards, were not wanted in the South.

In other words, it was possible in those days for one state to get an advantage over another by keeping such social benefits as good public education and wage standards down at lower levels. The South took advantage of New England's higher social standards.

* * * There is no such thing as total equality for all parts of the United States. Some industries will go where a pool of highly skilled labor exists. New England has had a comeback since World War II because the skills of its work force, nourished by its superior educational system, proved an important plus in the new electronic industries.

Steel mills will always be located where coal and iron ore can most conveniently be brought together near an ample supply of water.

To produce aluminum you need a plentiful supply of relatively cheap electricity. Etc., etc.

But it is possible by political action to equalize such factors bearing upon location of industries as social services, amenities and wages.

That is precisely what the New Deal plus further social legislation following in its wake through the Lyndon Johnson era did.

It gradually set up federal standards for wage rates, for unemployment compensation, for social services of all kinds - and also for education. Unionization, broadening of the franchise down among the ranks of the poor, and the generalization of social and educational standards gradually reduced the advantage which the socially slower sections of the country had enjoyed previous to the New Deal.

* * * The net movement over the period from the New Deal through Johnson was toward uniformity. The US moved steadily in the direction of becoming a single country with uniform social and work standards. Inequalities still exist. The past has not been wiped out entirely. Not all blacks yet vote in all communities. Not all wages are uniform. Not all education is equal. But, by and large, the US moved a long way from being a collection of widely disparate societies to becoming a single society.

If the Congress approves Mr. Reagan's new federalism the trend toward uniformity will be checked and might even be reversed.

Uniformity will be maintained for medicare and medicaid because these will remain federal. But beginning in 1984, under the plan, the states will take over Aid to Families with Dependent Children and food stamps. By 1988 the states will be in charge of ''over 40 federal grant programs'' which will include ''transportation, education and social services.'' After 1988 each state will be free to do what it pleases in these areas. Uniformity can disappear because:

''They (the states) can then preserve, lower or raise taxes on their own and fund and manage these programs as they see fit.''

The argument in favor is that ''these programs will be more responsible to both the people they are meant to help and the people who pay for them.''

* * * It is a reasonable assumption that if the plan does clear Congress ''the people they are meant to benefit'' will be better off in states where they can outvote ''the people who pay for them.'' But in states where those who pay the taxes can exercise more political power it is a reasonable assumption that the social programs will languish.

That is the way things were before the federalization, hence generalization, of social and working standards. It is the way things can become again - if the program goes through Congress.