State-Centric Federalism 45% Government Reduction: Could It Truly Work in America?

September 25, 2025

Introduction: Re-envisioning the American Federal Compact

A conceptual model has been advanced under the banner of "State-Centric Federalism," proposing a fundamental restructuring of the American political system. This model envisions a significant devolution of power from the national government to the individual states. At its core, the proposal advocates for a 45% reduction in the size and scope of the federal government, confining its authority to a narrow set of explicitly defined functions: Common Defense, the maintenance of Free Trade between states, and the protection of Fundamental Constitutional Rights. In this paradigm, the states are reimagined as dynamic, semi-sovereign entities—variously termed "republics" or "commonwealths"—that possess the autonomy to cultivate unique cultural identities, engineer distinct regional economies, and establish their own legal and regulatory policies. The U.S. Constitution would remain the "Supreme Law" and "Interpretive Framework," providing the foundational rules that bind this looser confederation together.

This analysis written by James Dean is not a novel concept but rather the latest iteration in an enduring debate over the proper balance of power that dates back to the nation's founding. It represents a radical departure from the trajectory of American governance over the past century, which has been characterized by a steady centralization of authority. And this State-Centric model returns power closer to the local people, while reducing political corruption that's widespread at the Federal level. To understand its significance, it is useful to contrast it with established models of American federalism. The pre-New Deal era was defined by Dual Federalism, often described as a "layer cake," where federal and state governments operated in distinct, largely separate spheres of influence. State-Centric Federalism can be viewed as an extreme variant of this model, with even more rigidly defined and severely limited federal powers. Following the New Deal, the system evolved into Cooperative Federalism, or "marble cake" federalism, marked by overlapping functions, shared power, and a complex web of federal grants-in-aid and mandates designed to achieve national goals. The proposed model is a direct repudiation of this cooperative framework. More recently, the "New Federalism" of the late 20th century sought to return some power to the states, but it did so largely within the existing cooperative structure, making it a far less radical precursor. The State-Centric model, therefore, aligns most closely with the concerns of the Anti-Federalists, who feared that the Constitution would create an overly powerful national government that would eventually subsume state authority.

The central thesis of State-Centric Federalism is that this radical decentralization will unlock dormant economic potential and foster a more vibrant cultural diversity without sacrificing the essential unity of the nation. This report will critically examine that claim by addressing a series of core questions. Can a system that structurally resembles the Articles of Confederation avoid the fatal flaws that led to that government's collapse? Is the U.S. Constitution, as interpreted for the last 80 years, a viable framework for such a model, or does its implementation require a fundamental and perhaps unattainable reinterpretation of its key clauses? Finally, what are the full economic, social, and political costs of dismantling the national infrastructure of cooperative governance that has been built over generations?

Answering these questions reveals a central paradox: the model's stability appears to depend on a minimalist federal legislature and executive, yet it simultaneously necessitates a powerful and active federal judiciary to constantly police the boundaries between states and enforce the federal government's narrow remit. With a dramatic reduction in federal lawmaking and executive action, the vacuum of power and the heightened autonomy of states would inevitably lead to more frequent and intense disputes over trade, resources, and legal recognition. The U.S. Constitution is designated as the ultimate "Interpretive Framework," and the institution tasked with that interpretation is the Supreme Court. Consequently, the Court's role as the primary arbiter of national disputes would be magnified, making it the central, and perhaps only, institution of national governance. This creates a structural tension, as the modern power of the judiciary is itself a product of the broad interpretation of federal authority—particularly through the Commerce Clause—that this model seeks to reverse. The model, in effect, relies on the fruit of the very constitutional tree it aims to cut down.

Model	Metaphor	Dominant Constitutional Interpretation	Primary Intergovernmental Mechanism	Historical Period
Dual Federalism	Layer Cake	Narrow Commerce Clause; Strong 10th Amendment	Separation of functions	c. 1789–1937
Cooperative Federalism	Marble Cake	Broad Commerce Clause; Weak 10th Amendment	Federal grants-in-aid; Mandates	c. 1937–1970s
New Federalism	"On Your Own"	Mixed; Devolution of power	Block grants; Deregulation	c. 1970s–2000s
State-Centric Federalism	Confederation of Republics	Radically limited enumerated powers; Supremacy of 10th Amendment	Judicial adjudication of disputes	Proposed

II. The Economic Calculus of State Autonomy

The economic case for State-Centric Federalism rests on the premise that devolving power will unleash innovation and growth. However, this potential must be weighed against the significant risks of economic fragmentation, increased inequality, and a return to the destructive interstate competition that plagued the nation's early history.

A. The Promise of Localized Growth: States as "Laboratories of Democracy"

A primary argument for the model is that states can better tailor economic policies to their specific strengths. An agricultural state could prioritize investments in farming technology and water management, while a state with a robust technology sector could offer R&D tax credits and foster university-industry partnerships. This localized approach avoids the inefficiencies of "one-size-fits-all" federal mandates that may be ill-suited to diverse regional economies.

This framework is designed to empower states to function as the "laboratories of democracy" famously described by Supreme Court Justice Louis Brandeis. In his view, "a single courageous state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country". Proponents argue that successful state experiments, such as welfare reform in the 1990s or early efforts in airline deregulation, can provide valuable lessons and build public confidence for broader adoption. Conversely, policy failures, like California's troubled initial foray into electricity deregulation, would be contained within that state's borders, preventing a national crisis.

Furthermore, granting states greater fiscal autonomy could generate a powerful local economic multiplier effect. When money is spent at local businesses, a larger portion of it tends to remain within the community, as those businesses are more likely to use local suppliers, banks, and services. This re-circulation of capital, or "local premium," strengthens the local tax base, which in turn can fund better schools, libraries, and public infrastructure. Studies have also suggested that locally owned businesses can generate a better net fiscal result for communities, using less public infrastructure per dollar of revenue compared to large, non-local retailers.

However, the "laboratories" metaphor has its limits. Critics argue that many states lack the financial resources, expertise, and administrative capacity to engage in genuine policy innovation. There is also a significant "free-rider" problem: a state that invests heavily in developing a successful new policy bears all the costs and risks, while other states can simply copy the successful model at no cost, disincentivizing the initial innovation. Moreover, the history of the concept is complex. The very case that prompted Brandeis's famous dissent,

New State Ice Co. v. Liebmann, involved an Oklahoma law that created a state-sanctioned monopoly for the ice industry. Critics argue this was not a "novel experiment" but a classic case of rent-seeking, where an established industry used state power to stifle competition from new technologies like the refrigerator. This historical example serves as a caution that state autonomy can be co-opted by powerful local interests to protect themselves from market forces rather than to foster genuine innovation.

B. The Perils of Economic Fragmentation

While proponents focus on innovation, a decentralized economic system carries profound risks of fragmentation and inefficiency, with a powerful and cautionary historical precedent.

The period under the Articles of Confederation (1781-1789) provides a stark illustration of the dangers of a weak central government. Lacking the power to regulate commerce, the national government was unable to prevent states from engaging in destructive economic warfare. States erected tariffs and trade barriers against one another, disrupting the flow of goods and creating a chaotic and unpredictable commercial environment. This economic turmoil was a primary motivation for the Constitutional Convention of 1787, where the framers granted Congress the power "to regulate Commerce...among the several States" specifically to create a unified national market and prevent a return to such balkanization. By severely curtailing this federal power, the State-Centric model risks reviving the very economic conflicts the Constitution was designed to solve.

The model also proposes a federal role in ensuring "Free Trade (Interstate)," but this mandate is inherently self-defeating. The successful functioning of a national market is not a self-enforcing principle; it requires a robust regulatory and judicial apparatus to prevent protectionism. States can erect trade barriers not only through explicit tariffs but also through a complex maze of differing environmental, labor, and product safety regulations. For example, a business in one state might be effectively blocked from selling its products in another because they do not meet the second state's unique, and perhaps intentionally burdensome, standards. To determine whether such a regulation is a legitimate local health and safety measure or a disguised trade barrier, a federal body—a court or an agency—would need to conduct a complex balancing test, weighing the local benefit against the burden on interstate commerce. This is the very essence of the modern "Dormant Commerce Clause" jurisprudence, which requires a powerful federal judiciary to scrutinize state laws. Therefore, to effectively enforce "Free Trade," the supposedly "reduced" federal government would require expansive power to investigate and adjudicate the internal policies of the states. This directly contradicts the model's core principle of maximizing state autonomy, giving the federal government a job that requires the very tools the model takes away.

In a modern context, this fragmentation would impose enormous compliance costs on businesses that operate nationally. Instead of a single set of federal standards in many areas, companies would face a patchwork of 50 different legal regimes for employment, environmental protection, and consumer safety. The cost of navigating these disparate systems would be substantial. For large multinational enterprises, state and local income tax compliance already requires an average of over 700 separate filings annually; this complexity would be magnified across all regulatory domains. Research indicates that regulatory compliance already consumes between 1.3% and 3.3% of the average U.S. firm's total wage bill, and these costs would likely skyrocket in a fragmented system.

This competitive environment could also trigger a "race to the bottom." To attract mobile capital and jobs, states might feel pressured to lower their standards. In the environmental sphere, this could lead to the creation of "pollution havens," where states weaken clean air and water rules to attract industry, resulting in a net degradation of the national environment. While some scholars argue this fear is overstated, noting that businesses often prefer regulatory stability and that public environmental consciousness has grown, the structural incentive for such competition remains a potent threat. A similar dynamic could play out with labor laws, as states compete by lowering minimum wages, weakening workplace safety regulations, and curtailing the rights of workers to organize. This could lead to a nationwide erosion of labor standards, even as some studies remain skeptical that such a race is inevitable.

C. Fiscal Disparities and the End of Equalization

The proposed 45% reduction in the federal government would have its most immediate and dramatic impact on the system of intergovernmental fiscal transfers, which currently serves as a powerful, albeit implicit, mechanism for economic equalization.

In fiscal year 2024, the federal government is projected to transfer approximately $1.1 trillion to state and local governments, accounting for over 16% of all federal spending. These funds, which support everything from healthcare and education to infrastructure, constitute a vital portion of state budgets, making up, on average, 27% of combined state and local general revenues in 2021. The distribution is highly variable, ranging from over 39% of revenues in Alaska to around 21% in states like New Jersey and Kansas, highlighting the significant reliance of certain states on this federal aid. These transfers, often distributed through formula grants like Medicaid or block grants for social services, effectively redistribute wealth from more affluent states to those with smaller tax bases or greater needs, helping to ensure a baseline of comparable public services across the nation.

A drastic cut to the federal budget would decimate these transfer payments. States with weaker economies, fewer natural resources, or higher poverty rates would find themselves unable to provide the same quality of healthcare, education, and social services as their wealthier neighbors. This would not only exacerbate regional inequality but could also lead to a "death spiral" for struggling states, as a decline in public services could prompt an exodus of businesses and skilled workers, further eroding the tax base.

Proponents of reducing federal aid often cite the "moral hazard" argument: that equalization payments can subsidize fiscally irresponsible policies by insulating state governments from the consequences of their poor choices. However, this argument frequently overlooks the deep-seated structural and historical factors that contribute to regional economic disparities, which are often beyond the control of any single state government. The removal of the federal safety net could punish states for their geography or industrial history rather than for specific policy failings.

Finally, a significantly smaller federal government would mean a sharp reduction in investment in critical national infrastructure. While states and localities currently account for the majority of infrastructure spending, federal funding is often essential for large-scale, multi-state projects like the interstate highway system, the national energy grid, and major scientific research initiatives. Recent legislation like the Infrastructure Investment and Jobs Act (IIJA) has directed hundreds of billions of federal dollars toward such projects. A retreat from this role would leave a void that individual states, acting alone, would be unable to fill, potentially leading to the decay of the physical and scientific infrastructure that underpins the national economy.

Economic Factor	Potential Positive Impact (Proponent View)	Potential Negative Impact (Skeptical View)	Supporting Evidence	Net Impact Assessment
Regulatory Innovation	States act as "laboratories of democracy," creating tailored and efficient policies that can be emulated.	States lack resources for innovation, are prone to special interest capture, and face free-rider problems.	7	Moderately Negative
Interstate Commerce	Reduced federal bureaucracy lowers barriers to entry for local businesses.	Recreates pre-constitutional trade wars; imposes massive compliance costs on national businesses.	10	Highly Negative
Fiscal Equity	Ends "moral hazard" of federal bailouts, forcing states to be fiscally responsible.	Exacerbates inequality between rich and poor states; undermines baseline for public services.	35	Highly Negative
Labor Standards	States can set labor laws appropriate for their local economies and cost of living.	Triggers a "race to the bottom," eroding worker protections, wages, and safety nationwide.	6	Highly Negative
Environmental Quality	Local control allows for policies that address unique regional environmental challenges.	Creates "pollution havens" as states compete for industry by lowering standards.	6	Highly Negative

III. The Constitutional Framework Under Stress

Implementing State-Centric Federalism would require not merely a shift in policy but a revolutionary reinterpretation of the U.S. Constitution, reversing nearly a century of established legal doctrine. The model elevates certain clauses to preeminence while radically diminishing others that form the basis of modern federal power.

A. The Tenth Amendment as the Cornerstone

The Tenth Amendment, which states that powers not delegated to the federal government are reserved to the states or the people, would become the central pillar of this new constitutional order. For much of the 20th century, following the landmark case

United States v. Darby (1941), the Supreme Court treated the amendment as a "truism"—a simple restatement of the principle of enumerated powers that did not grant states any substantive authority of their own.Under the State-Centric model, this interpretation would be discarded. The Tenth Amendment would be read expansively as an affirmative guarantee of state sovereignty, creating a powerful presumption against the constitutionality of any federal action not explicitly and narrowly authorized by the Constitution. This view aligns with the modern "anti-commandeering" doctrine, articulated in cases like

New York v. United States (1992) and Printz v. United States (1997), which prohibits the federal government from compelling states to enact or administer federal regulatory programs. The model would effectively expand this doctrine from a specific limitation into a general principle governing nearly all federal-state relations.

B. Redefining Federal Power: The Commerce and Supremacy Clauses

The model's viability hinges on a dramatic rollback of the federal government's powers under two key clauses.

First, the Commerce Clause of Article I, Section 8, which grants Congress the power to regulate commerce "among the several States," would have to be radically curtailed. Since the New Deal, and particularly since the case of Wickard v. Filburn (1942), the Supreme Court has interpreted this clause broadly, allowing Congress to regulate not just interstate trade itself but any intrastate activity that has a "substantial economic effect" on interstate commerce. This expansive reading provides the constitutional foundation for a vast range of federal laws, including landmark environmental regulations and civil rights legislation. The State-Centric model would require a return to a pre-1937 interpretation, limiting federal authority to the direct regulation of goods crossing state lines. Such a move would invalidate the legal basis for much of the modern federal government.

Second, the Supremacy Clause of Article VI, which declares that the Constitution and federal laws made "in Pursuance thereof" are the "supreme Law of the Land," would be re-scoped.18 In the current system, this clause ensures that valid federal laws preempt conflicting state laws. In the proposed model, the operative phrase becomes "in Pursuance thereof". Because the legitimate, enumerated powers of the federal government would be so narrowly defined (common defense, interstate trade, fundamental rights), the Supremacy Clause would only apply within that very limited sphere. In all other areas of policy, state law would be implicitly supreme, as there would be no valid federal law to conflict with it.

C. Horizontal Federalism: The Clauses that Bind

With states operating as highly distinct legal entities, the constitutional provisions governing relations between the states—so-called "horizontal federalism"—would become critically important.

The Full Faith and Credit Clause (Article IV, Section 1) would be essential to prevent legal and commercial chaos. This clause requires states to recognize the "public Acts, Records, and judicial Proceedings" of other states. Its most powerful effect is on court judgments; a final judgment on a contract dispute in one state must be honored and enforced in all others, preventing endless re-litigation. However, its application to "public Acts"—that is, statutes—is significantly weaker. The Supreme Court has held that a state is not required to substitute another state's laws for its own when they conflict on a matter of public policy. In a system with widely divergent state laws on issues like marriage, professional licensing, and consumer protection, this could lead to significant legal friction and uncertainty for individuals and businesses operating across state lines.

The Privileges and Immunities Clause (Article IV, Section 2) would also be a crucial safeguard. It prevents states from discriminating against citizens of other states with regard to fundamental rights, such as the right to travel, own property, and conduct business. This would ensure that a citizen of the "Texas Commonwealth" could operate a business in the "California Republic" on roughly equal terms with local citizens, preserving a basic level of national economic unity.

The model's stated commitment to protecting "Fundamental Constitutional Rights" at the federal level masks a deep and potentially destabilizing constitutional problem. Most of the protections in the Bill of Rights, such as freedom of speech and religion, apply to the states only through the doctrine of "incorporation" via the Fourteenth Amendment. This doctrine, developed by the Supreme Court primarily during the 20th century, represented a massive expansion of federal judicial power into the traditional domain of the states. It was predicated on a view of federalism in which the national government has a duty to enforce a uniform standard of fundamental rights against state infringement. A judiciary committed to the State-Centric model's core principles of radical decentralization and state sovereignty would face a profound ideological conflict. To continue enforcing these incorporated rights, the Court would have to embrace the very type of federal judicial supremacy that the rest of the model vehemently rejects. This internal contradiction could lead to a gradual weakening of enforcement or even a "de-incorporation" of certain rights, creating a patchwork of civil liberties where the meaning of "freedom of speech" or "due process" could vary significantly from one state to another.

Constitutional Clause	Current Mainstream Interpretation (Post-New Deal)	Proposed State-Centric Interpretation	Key Supreme Court Case (Illustrative)
10th Amendment	A "truism" that restates the principle of enumerated powers; offers little substantive protection to states.	The cornerstone of the Constitution; creates a strong presumption of state sovereignty and strictly limits federal power.	United States v. Darby (1941)
Commerce Clause	Grants Congress broad power to regulate any activity with a "substantial effect" on interstate commerce.	Grants Congress narrow power to regulate only the direct, cross-border exchange of goods.	Wickard v. Filburn (1942)
Supremacy Clause	Valid federal laws preempt conflicting state laws across a wide range of policy areas.	Federal supremacy is limited to the few, narrowly defined areas of delegated federal power.	McCulloch v. Maryland (1819)
Full Faith and Credit Clause	Requires states to enforce final judgments from other states but allows flexibility on conflicting state laws.	Becomes critical for enforcing judgments to prevent legal chaos, but friction over conflicting state laws would increase.	Baker v. General Motors Corp. (1998)

IV. Challenges in National Governance and Cohesion

Beyond the economic and constitutional hurdles, the State-Centric model presents profound practical challenges to governing a large, complex nation. The proposed structure would weaken the country's ability to manage national security, enforce fundamental rights, and respond to large-scale crises.

A. Common Defense in a Disaggregated Nation

While "Common Defense" is listed as a core federal function, its execution in a radically decentralized system would be fraught with conflict. The National Guard serves as a prime example of the potential for command-and-control disputes. The Guard has a dual identity: it is a state militia under the command of a governor for state missions (State Active Duty) but also a reserve component of the U.S. Army and Air Force that the President can federalize for national missions (Title 10 status).

In a national security crisis, this dual command structure could lead to a constitutional standoff. If a President, operating under the "Common Defense" mandate, sought to deploy the National Guard from a particular state for a mission that the state's governor opposed, a crisis of authority would be inevitable. While the Supreme Court has historically affirmed federal supremacy in federalizing the Guard, the political and legal consensus that underpins this authority would be significantly eroded in a system that elevates state sovereignty to its primary principle. A governor of a powerful "commonwealth" might feel empowered to challenge a federal mobilization order, paralyzing a critical component of the nation's military readiness.

B. The Federal Role as Guarantor of Fundamental Rights

The model's assertion that a reduced federal government can protect "Fundamental Constitutional Rights" is contradicted by American history. The enforcement of these rights, particularly for vulnerable minorities, has often required decisive and powerful federal intervention against the actions of the states themselves.

The Civil Rights Movement of the 20th century is the most potent example. For nearly a century after the Civil War, many states, particularly in the South, were the primary violators of the constitutional rights of African Americans through the system of Jim Crow segregation, voter disenfranchisement, and state-sanctioned violence. It was only through landmark federal legislation—like the Civil Rights Act of 1964 and the Voting Rights Act of 1965—and the willingness of the federal government to deploy federal marshals and federalize the National Guard to enforce court orders for desegregation that these rights were made real. A federal government reduced in size by 45% and stripped of its broad enforcement powers under the Commerce and Fourteenth Amendments would lack both the legal authority and the practical capacity to act as a meaningful guarantor of rights. The model provides a promise of protection without the power to enforce it, rendering the federal guarantee largely symbolic.

C. Coordinating National Crises

Large-scale crises, such as pandemics, major hurricanes, or widespread cyberattacks, do not respect state borders and frequently overwhelm the resources of any single state. Effective response requires a high degree of national coordination, resource mobilization, and financial support—functions currently led by federal agencies like the Federal Emergency Management Agency (FEMA).

Research on disaster management in decentralized systems consistently highlights significant challenges. These include poor communication and coordination between different levels of government, difficulties in securing adequate funding as local jurisdictions prioritize more immediate political needs over long-term preparedness, and a general lack of local capacity to handle catastrophic events. The State-Centric model would likely amplify these problems, leading to a slower, less equitable, and ultimately less effective response to national emergencies, with devastating consequences for public health and safety.

By dramatically empowering states and reframing the Constitution as a compact between sovereign entities, the model inadvertently creates the political and legal architecture for a resurgence of dangerous political theories, including nullification and secession. When state sovereignty is elevated to the primary principle of the union and the federal government is relegated to the role of a limited agent, the intellectual groundwork is laid for a state to challenge the legitimacy of federal actions. If a powerful state, such as the "California Republic," were to fundamentally disagree with a federal action taken under the "Common Defense" clause, the model's ideology would provide it with the framework to declare that action an unconstitutional overreach and refuse to comply within its borders. This is the essence of nullification, a theory that brought the nation to the brink of civil war in the 1830s. The historical trajectory of such crises demonstrates that they are often precursors to secessionist movements. Thus, a model intended to perfect the union of states may, in fact, provide the ideological roadmap for its dissolution.

V. Synthesis and Conclusion

The model of State-Centric Federalism presents a coherent, if radical, vision for reordering the American republic. It promises a future of greater local control, policy innovation tailored to regional needs, and a vibrant tapestry of distinct cultural and economic communities, all while achieving significant taxpayer savings through a drastically smaller federal government. However, a rigorous analysis grounded in constitutional history, economic principles, and the practical realities of governance reveals that this vision is fraught with profound and potentially catastrophic risks.

The model's potential to foster localized economic growth is weighed down by the near certainty of economic fragmentation. By dismantling the federal authority that created and maintains a unified national market, it risks a return to the destructive interstate trade wars of the Articles of Confederation era, magnified by the complexity of the modern economy. The potential for a "race to the bottom" in environmental and labor standards, while debated, remains a significant threat to national well-being. Furthermore, the elimination of federal fiscal transfers would likely trigger a dramatic rise in regional inequality, leaving economically disadvantaged states unable to provide basic public services comparable to their wealthier neighbors.

Constitutionally, the model requires a judicial revolution, overturning more than 80 years of settled precedent regarding the scope of federal power. It relies on an idealized and untested interpretation of the Tenth Amendment while effectively nullifying the modern understanding of the Commerce and Supremacy Clauses. This legal restructuring would create immense uncertainty and could undermine the national enforcement of fundamental civil rights and liberties, which have historically depended on a strong federal backstop against state infringement.

Ultimately, State-Centric Federalism appears to be a solution in search of a problem it cannot solve. In its pursuit of an idealized form of state autonomy, it overlooks the hard-won lessons of American history: that a functioning, prosperous, and just nation requires a delicate and evolving balance between federal and state power. The weaknesses of a system with an overly weak central government have been tried and found wanting. The pathways to implementing such a system would be immense, likely requiring a new constitutional convention to enact the transformative changes to the nation's legal and political structure. The proposed taxpayer savings would almost certainly be eclipsed by the economic costs of fragmentation, the social costs of inequality, and the political costs of a disunited and less capable nation. The model, therefore, represents a high-risk gamble with the foundations of the American federal compact. Therefore, the smartest option is to find a middle ground balance of Federal power which respects the individual rights of each State. This could entail a hybrid government paradigm that leans more towards sovereign State control, cutting the bloated Federal budget, narrowing its focus and such a model would better satisfy the variety of regional State cultural differences, thus quelling civil unrest in America.