by Richard E. Wagner
Mercatus Center
May 07, 2014
Federalism is commonly thought to be a pro-liberty form of government. The American system was clearly founded on classically liberal principles. Yet it is reasonable to wonder how a system in which two or more governments can each tax and regulate a citizen can be favorable to liberty relative to a system where only one government can do that. The answer is that federalism can be favorable to liberty, but it need not be. Whether federalism is favorable or hostile to liberty depends on whether the governments within the system must compete for citizen support or whether those governments are able to collude with one another, and thus expand political power relative to citizen liberty. While the United States was founded on competitive principles, it has morphed into a system of collusive federalism—and the 16th and 17th Amendments to the Constitution played a big role in this transition.

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