[Senate Hearing 106-196] [From the U.S. Government Publishing Office] S. Hrg. 106-196 FEDERALISM ======================================================================= HEARINGS BEFORE THE COMMITTEE ON GOVERNMENTAL AFFAIRS UNITED STATES SENATE ONE HUNDRED SIXTH CONGRESS FIRST SESSION ---------- MAY 5, 1999 THE STATE OF FEDERALISM MAY 6, 1999 FEDERALISM AND CRIME CONTROL JULY 14, 1999 S. 1214--THE FEDERALISM ACCOUNTABILITY ACT OF 1999 ---------- Printed for the use of the Committee on Governmental Affairs159-454 cc WASHINGTON : 1999 _______________________________________________________________________ For sale by the Superintendent of Documents, Congressional Sales Office U.S. Government Printing Office, Washington, DC 20402 COMMITTEE ON GOVERNMENTAL AFFAIRS FRED THOMPSON, Tennessee, Chairman WILLIAM V. ROTH, Jr., Delaware JOSEPH I. LIEBERMAN, Connecticut TED STEVENS, Alaska CARL LEVIN, Michigan SUSAN M. COLLINS, Maine DANIEL K. AKAKA, Hawaii GEORGE V. VOINOVICH, Ohio RICHARD J. DURBIN, Illinois PETE V. DOMENICI, New Mexico ROBERT G. TORRICELLI, New Jersey THAD COCHRAN, Mississippi MAX CLELAND, Georgia ARLEN SPECTER, Pennsylvania JOHN EDWARDS, North Carolina JUDD GREGG, New Hampshire Hannah S. Sistare, Staff Director and Counsel Paul R. Noe, Senior Counsel Joyce A. Rechtschaffen, Minority Staff Director and Counsel Lawrence B. Novey, Minority Counsel Darla D. Cassell, Administrative Clerk C O N T E N T S ------ Opening statements: Page Senator Thompson............................................. 1, 57, 95 Senator Lieberman............................................ 13 Senator Voinovich............................................16, 72 Senator Edwards.............................................. 32 Senator Durbin............................................... 69 Senator Roth................................................. 114 Prepared statements: Senator Collins.............................................. 2 Senator Levin................................................ 2, 96 Senator Lieberman............................................ 58 Senator Voinovich............................................ 97 WITNESSES Wednesday, May 5, 1999 Hon. Tommy G. Thompson, Governor, State of Wisconsin, and President, Council of State Governments........................ 4 Hon. Michael O. Leavitt, Governor, State of Utah, and Vice Chair, National Governors' Association................................ 8 Hon. Daniel T. Blue, Jr., Majority Leader, North Carolina House of Representatives, and President, National Conference of State Legislatures................................................... 21 Hon. Clarence E. Anthony, Mayor, City of South Bay, Florida, and President, National League of Cities........................... 24 John O. McGinnis, Professor of Law, Benjamin N. Cardozo Law School, Yeshiva University..................................... 37 William A. Galston, Professor, School of Public Affairs, University of Maryland at College Park......................... 40 Thursday, May 6, 1999 Hon. Edwin Meese III, Former Attorney General of the United States, Ronald Reagan Distinguished Fellow in Public Policy, The Heritage Foundation, and Chair, ABA Task Force on the Federalization of Criminal Law................................. 59 Hon. Gilbert S. Merritt, Judge, U.S. Court of Appeals for the Sixth Circuit, Nashville, Tennessee............................ 64 Hon. John M. Dorso, Majority Leader, North Dakota House of Representatives, on behalf of the National Conference of State Legislatures................................................... 80 Gerald B. Lefcourt, Immediate Past President and Chair, Legislative Committee, National Association of Criminal Defense Lawyers........................................................ 82 John S. Baker, Jr., Dr. Dale E. Bennett Professor of Law, Louisiana State University Law Center.......................... 85 Wednesday, July 14, 1999 Hon. John T. Spotila, Administrator, Office of Information and Regulatory Affairs, Office of Management and Budget............ 98 Randolph D. Moss, Acting Assistant Attorney General, Office of Legal Counsel, U.S. Department of Justice...................... 101 Hon. Thomas R. Carper, Governor, State of Delaware, and Chairman, National Governors' Association................................ 115 Hon. John M. Dorso, Majority Leader, North Dakota House of Representatives, on behalf of the National Conference of State Legislatures................................................... 121 Alexander G. Fekete, Mayor, Pembroke Pines, Florida, on behalf of the National League of Cities.................................. 125 Ernest Gellhorn, Professor of Law, George Mason University....... 130 Caleb E. Nelson, Associate Professor of Law, University of Virginia School of Law......................................... 132 Rena Steinzor, Associate Professor, University of Maryland School of Law......................................................... 134 Alphabetical List of Witnesses Anthony, Hon. Clarence E.: Testimony.................................................... 24 Prepared statement........................................... 171 Baker, Jr., John S.: Testimony.................................................... 85 Prepared statement, May 6, 1999.............................. 266 Prepared statement, July 14, 1999............................ 409 Blue, Jr., Hon. Daniel T.: Testimony.................................................... 21 Prepared statement........................................... 163 Carper, Hon. Thomas R.: Testimony.................................................... 115 Prepared statement........................................... 306 Dorso, Hon. John M.: Testimony, May 6, 1999....................................... 80 Prepared statement, May 6, 1999.............................. 251 Testimony, July 14, 1999..................................... 121 Prepared statement, July 14, 1999............................ 324 Fekete, Alexander G.: Testimony.................................................... 125 Prepared statement........................................... 340 Galston, William A.: Testimony.................................................... 40 Prepared statement........................................... 195 Gellhorn, Ernest: Testimony.................................................... 130 Prepared statement........................................... 355 Leavitt, Hon. Michael O.: Testimony.................................................... 8 Prepared statement........................................... 153 Lefcourt, Gerald B.: Testimony.................................................... 82 Prepared statement........................................... 260 McGinnis, John O.: Testimony.................................................... 37 Prepared statement........................................... 180 Meese III, Hon. Edwin: Testimony.................................................... 59 Prepared statement........................................... 239 Merritt, Hon. Gilbert S.: Testimony.................................................... 64 Prepared statement........................................... 247 Moss, Randolph D.: Testimony.................................................... 101 Prepared statement........................................... 296 Nelson, Caleb E.: Testimony.................................................... 132 Prepared statement........................................... 365 Spotila, Hon. John T.: Testimony.................................................... 98 Prepared statement........................................... 291 Steinzor, Rena: Testimony.................................................... 134 Prepared statement........................................... 381 Thompson, Hon. Tommy G.: Testimony.................................................... 4 Prepared statement........................................... 143 Appendix Wednesday, May 5, 1999 Copy of S. 1214.................................................. 198 Letter dated May 4, 1999, from Donald R. Arbuckle, Acting Administrator and Deputy Administrator, Office of Information and Regulatory Affairs, to L. Nye Stevens, Director, Federal Management and Workforce Issues, General Government Division U.S. General Accounting Office................................. 212 Chart entitled ``Federal, State, & Local Taxes Collected Per Person,'' submitted by Chairman Thompson....................... 214 Adam D. Thierer, Walker Fellow in Economic Policy, The Heritage Foundation, prepared statement with an enclosure of the ``Backgrounder,'' dated January 27, 1999....................... 215 Wednesday, July 14, 1999 Letter dated July 14, 1999 to Chairman Thompson from Peter C. Hildreth, Director of Securities, State of New Hampshire, President, North American Securities Administrators Association, Inc., with an attachment.......................... 390 GAO report from L. Nye Stevens, Director, Federal Management and Workforce Issues, General Government Division, entitled ``Federalism: Comments on S. 1214--The Federalism Accountability Act of 1999,'' July 14, 1999, GAO/T-GGD-99-143.. 394 Shelley H. Metzenbaum, Ph.D., Visiting Professor at the University of Maryland School of Public Affairs, prepared statement...................................................... 421 Vicki C. Jackson, Professor of Law, Georgetown University Law Center, prepared statement..................................... 425 THE STATE OF FEDERALISM ---------- WEDNESDAY, MAY 5, 1999 U.S. Senate, Committee on Governmental Affairs, Washington, DC. The Committee met, pursuant to notice, at 9:12 a.m., in room SD-342, Dirksen Senate Office Building, Hon. Fred Thompson, Chairman of the Committee, presiding. Present: Senators Thompson, Collins, Voinovich, Lieberman, Levin, and Edwards. OPENING STATEMENT OF CHAIRMAN THOMPSON Chairman Thompson. Let us come to order, please. Gentlemen, thank you for coming. I apologize for being a little late. I picked a bad morning to have a meeting downtown this morning. I know that you have limited time before you have to depart. I will ask the Committee Members to refrain from making opening statements and let the witnesses testify, and then we will have an opportunity to make opening statements. I would like to insert opening statements from Senators Collins, Levin, and myself, into the record. [The prepared opening statements of Senators Thompson, Collins, and Levin follows:] PREPARED OPENING STATEMENT OF CHAIRMAN THOMPSON The issue the Committee is discussing today is at the heart of our Democracy. Federalism is the principle that some matters are best handled by State or local government and other matters should be addressed at the Federal level. Federalism helps clarify what government should be doing and where it should be done. The Framers of our Constitution strongly believed that government closest to the people works best. The chief architect of our Constitution, James Madison, said ``The powers delegated by the proposed Constitution to the Federal Government are few and defined. Those which are to remain in the State governments are numerous and indefinite.'' The Framers had good reason to limit the power of the Federal Government. The diffusion of power between the Federal Government versus State and local government, as well as among the different States, can lead to healthy competition. States will compete for citizens business, taxes and talent. Citizens can vote with their feet to choose among different government services. This will lead governments to strive to provide better services, lower taxes, and a higher quality of life tailored to the values and needs of the community. But we have strayed far from the federalist vision of the Framers. As Justice O'Connor noted, ``The Federal Government undertakes activities today that would have been unimaginable to the Framers in two senses: First, because the Framers would not have conceived that any government would conduct such activities, and second, because the Framers would not have believed that the Federal Government, rather than the States, would assume such responsibilities.'' Indeed, some proponents of Big Government view federalism as an historical relic. The consequences of this drift are regrettable. The Federal Government seems to many to be irresponsive, wasteful, and corrupt. Public cynicism toward government has risen to alarming levels. Some citizens feel that their right to vote, a right that came at a very high price, has lost its meaning. Reviving federalism would mean that many important decisions that affect people's lives would be made closer to home. Government as a whole could be more efficient, effective and accountable. Despite the many obstacles, there is hope that federalism is reascendant in the historical dialogue. The Supreme Court has breathed new life into federalist doctrines. Congress has taken some important steps to return authority to the States. And many State and local officials and the people they serve are rightly demanding a voice in the debate. Ultimately, that uniquely American quest may be the greatest hope for success. PREPARED OPENING STATEMENT OF SENATOR COLLINS Mr. Chairman, I commend you for holding these hearings on the State of Federalism. My hope is that these hearings will be an important first step that will help restore the vital principles that serve as the basis of our constitutional form of government. Clearly, the Federal Government has been a positive force for change in our society over the past 30 years, especially in areas such as environmental protection and civil rights. It will continue to do so in the future. However, I have become increasingly concerned that the Federal Government's role in our society has expanded far beyond what the constitutional Framers intended. Moreover, this expansion has continually encroached on the traditional prerogatives of State and local governments. The United States Constitution established the basic federalist principles that are the framework for the distribution of power among Federal, State and local governments. Under the Constitution, the Federal Government's proper role is to assume responsibility for broad national issues that directly impact the Nation as a whole, such as defense and the regulation of commerce between the States. As we all know but far too often forget, the Tenth Amendment to the Constitution reserves most other powers to State and local governments. The constitutional Framers wisely understood that, by virtue of their proximity to the people, State and local governments are in by far the best position to evaluate and respond to the needs of their communities and citizens. Unfortunately, Congress and unaccountable Federal agencies too often have undermined these critical federalist principles through well-meaning but ultimately counterproductive legislation and regulations. I am particularly concerned about Federal laws and regulations that ``preempt''--or nullify--traditional State and local laws. Without the ability to manage their affairs free of unwarranted Federal intrusion, State and local officials cannot craft workable programs that balance the competing interests of all citizens and at reasonable costs. Reversing the trend towards greater Federal control will require increasing vigilance by those of us who strongly support federalist principles. For example, last year the Clinton Administration introduced Executive Order 13083, which revoked a Reagan Administration Executive Order on federalism and would have granted the Federal Government unlimited policymaking authority over the States. Mr. Chairman, I eagerly cosponsored your Sense of the Senate Resolution-- which was adopted by unanimous consent--demanding that the President revoke his Executive Order. In August of last year, President Clinton thankfully withdrew this unwise Executive Order. I again commend you Mr. Chairman for directing the public's attention to this key issue. As a result of these hearings, I hope we can identify other useful steps that will advance the goal of restoring the proper role played by the Federal Government in the lives of our citizens. Such steps will hopefully deter Congress and Federal agencies from unnecessarily preempting State and local authority and restore the balance between Federal and State power that is called for in our Constitution. Thank you, Mr. Chairman. PREPARED OPENING STATEMENT OF SENATOR LEVIN Mr. Chairman, thank you for calling these hearings on the State of Federalism. It is, as always, a timely and important issue. We know from our Constitution, from our history books and from our experience that the relationship between the Federal Government and State, local, and tribal governments is one of balance and equilibrium, a partnership. Alexander Hamilton wrote in Federalist Paper No. 31 that ``it is to be hoped'' that the American people ``will always take care to preserve the constitutional equilibrium between the general (that is, Federal) and the State governments.'' That's the foundation upon which we must look at the operations of our laws and programs today. How are we doing in preserving the delicate balance, the equilibrium and partnership between the Federal Government and State, local, and tribal governments? Many of us in the Senate can appreciate this issue from both sides. We have served as either governors, mayors, or State legislators before coming to the Senate. I had the privilege of serving as the President of the Detroit City Council for a number of years before being elected to the Senate. And from that perspective, I know how important the Federal-State relationship is. That relationship is affected most directly when we at the Federal level preempt State law, either explicitly or implied. If we do it explicitly, then we have to be sure we are not upending the equilibrium of the Federal-State relationship. We need to evaluate whether the Federal preemption is not only useful or beneficial, but whether it's necessary. There are times when most of us have voted to affirmatively preempt State laws, and we did so out of the belief that it was the right thing to do for the benefit of the American people. We have done that with respect to our clean air and clean water standards that know no geographic boundaries; we have done that with regulating trucks and vehicles that drive through any and all States in our Nation; we have done that in the area of communication. I supported those laws and those decisions to preempt. But all too often we in Congress don't even address the issue of preemption when we legislate. We are silent about our intentions, and that silence requires both the Federal and the State and local agencies--and oftentimes the courts--to read the tea leaves, so to speak, to determine whether or not we in Congress intended to preempt State law. I think in those situations, the State and local governments should have the benefit of the doubt and the presumption should be that if Congress doesn't explicitly preempt, it does not intend to preempt. That's why for several Congresses I have introduced a bill to direct the courts not to find preemption if the statute doesn't explicitly require it. I hope we can make progress on that bill this Congress. I believe that Federal preemption of State, local or tribal law should be an affirmative, eyes-open action, and not one that we happen to fall into because a court has found an implication somewhere in the legislative history. For example, I am an original cosponsor of the Feinstein-Levin- Bryan bill, S. 678, which would protect consumers against ``title washing'' of automobiles. This bill was drafted in close coordination with a number of State attorney generals, including the Michigan Attorney General. We've included a very specific provision about how the bill would interact with State laws and regulations. We recognized in drafting the ``title washing'' bill that States including Michigan and California already have tough consumer laws on this subject and--in this case, as is often true, they provided an excellent model for Federal standards. I also introduced legislation to deter deceptive sweepstakes mailings, and I co-sponsored a bill on the same subject with Senator Collins. We've been careful not to inhibit the States from having their own, more protective laws and to delineate the extent to which we're preserving States' authority. We want to augment, not supersede, their efforts. We want a floor in our Federal laws for consumer protection in this instance, not a ceiling. With respect to the impact of Federal regulations on State and local government, Senator Thompson and I have introduced the Regulatory Improvement Act, S. 746, which requires cost-benefit analysis and risk assessment of major rules and that agencies seek the opinions and experience of State and local governments when regulating in areas where they would be affected. I appreciate the support of the State and local organizations for this bill. As those organizations know, S. 746 specifically requires Federal agencies, in the rulemaking process, to consider alternatives that will provide flexibility for State and local governments. S. 746 also fosters openness and public participation. I believe the bill is just the type of bill that promotes partnership and maximizes the use of everyone's resources. I look forward to hearing the testimony of our witnesses today, both the elected officials and the learned scholars who can give us a context of where we've been and where we're likely to be going. It is always good to hear from the representatives of our States, counties, and cities, and discuss how we can work together to make things better for all our citizens, throughout our Nation. Chairman Thompson. I will go ahead and recognize our first panel. We are pleased to have with us today the Hon. Tommy Thompson, Governor of the State of Wisconsin and President of the Council of State Governments. He will be followed by the Hon. Michael Leavitt, Governor of the State of Utah and Vice Chair of the National Governors' Association. We are pleased that you would be here with us today, two of our more outstanding governors. I could think of no one who could better help us wade through these issues than you two gentlemen. We know it is an inconvenience for you, but we sincerely appreciate your being here with us today. Without further ado, if you have opening comments that you would like to make, please do so, and we will put any prepared statement that you have into the record. Governor Thompson. TESTIMONY OF HON. TOMMY G. THOMPSON,\1\ GOVERNOR, STATE OF WISCONSIN, AND PRESIDENT, COUNCIL OF STATE GOVERNMENTS Governor Thompson. Thank you so very much, Mr. Chairman. It is a delight for me, coming from Wisconsin, to address this august body and to address Chairman Thompson as Chairman. I like that very much. --------------------------------------------------------------------------- \1\ The prepared statement of Governor Thompson appears in the Appendix on page 143. --------------------------------------------------------------------------- Chairman Thompson. I have been trying to claim relationship, but nobody will believe me. Governor Thompson. You have done an outstanding job, and Senator Collins and, of course, Senator Voinovich, who left the ranks of being a governor and now is an outstanding U.S. Senator. It is always a pleasure to see my good friend, George, again. Of course, we are all very sympathetic and saddened by the two individuals that died in Armenia yesterday, late last evening, as well as the terrible tornadoes in the Midwest, in Kansas and Oklahoma. But it is a pleasure for both Governor Leavitt and myself to have this privilege to address this august Committee on a very important issue of federalism. Mr. Chairman, federalism and devolution, as you well know, represent a cornerstone of our Nation's underlying democratic principles, and you, Mr. Chairman, have led the fight in this and we applaud you from the State level. The Tenth Amendment to the Constitution of the United States recognizes the uniqueness that continues to exist and thrive at each and every State in America. More importantly, the Tenth Amendment acknowledges that the States have the authority as well as the ability to minister to their own needs. When our forefathers debated how our Nation would be governed, they devised a clear set of principles that defined the roles as well as the responsibilities of the Federal Government and State Governments. Yet, over time, adherence to those principles have suddenly eroded. Recently, a shift from the ``Washington knows best'' attitude ushered in the first change in the majority in the U.S. House of Representatives, and along with the distinguished Chairman and other U.S. Senators, formed a partnership called the new-found federalism. A strong component that helped fuel the shift of power can be directly attributable to a platform that clearly emphasized a return of power as well as control to the State level. After the elections in 1994 and then after the elections in 1996, it somehow slowed down. The discussion of devolution did not appear as often as it did in 1994 and 1995, but we were able to get some legislation passed, which was led by you, Senator Thompson, and, of course, urged on at that time by Governor Voinovich. To this end, Mr. Chairman, it is with a sense of optimism for reform and historical gravity that I address this august body. I strongly commend you for your appreciation and attention to the issue of federalism, for when granted the power and the flexibility, States and local governments have proven to be the innovators of the ideas and reforms that are improving the lives of all Americans. Throughout our history, State and local governments have acted as the laboratories of democracy. State and local governments continually amaze us with innovation and decisive action when they are allowed to flourish unfettered by excessive Federal restraint. It is critical, then, that we closely examine the relationship and responsibilities respective to our governing bodies and review the impact Federal restrictions have on the States' ability to govern effectively. More importantly, as we enter a new millennium, we must reinvigorate the partnerships among the Federal, State, and local governments to ensure the American people are the benefactors of a strong united effort to address and solve the problems that face our great country. As President of the Council of State Governments, I speak to you today on behalf of an organization whose individual members are involved daily in conducting the people's business at the State level. CSG is comprised of State leaders from all 50 States and U.S. territories, representing all three branches of government. CSG's membership is the living embodiment of the vibrancy of American federalism. CSG has consistently been a strong proponent of the federalist model. Our commitment to sharing those principles was reinvigorated at a summit convened in November 1997, following the enactment of the very far-reaching Unfunded Mandates Reform Act of 1995. At the prompting of Governor Michael Leavitt, the meeting, held in conjunction with the American Legislative Exchange Council, the National Conference of State Legislatures, and the National Governors' Association, was convened to recommend State reaction to the historic devolution of shifting responsibilities from the Federal to the State Governments. Then, as now, States faced a variety of challenges and opportunity as they approach varying degrees of Federal restriction. The summit produced an 11-point plan aimed at improving balance and greater accountability to that State and Federal partnership. I have attached a copy of the 11 points advocated at the conclusion of that meeting to my written testimony, but I would like to quickly summarize those objectives and provide a few brief examples of how Federal restrictions and interference is impacting our ability to institute positive reform in our respective States. The principles voted on and passed at that meeting include asking Congress to limit and clarify Federal preemption of State law and Federal regulations imposed upon States, streamline block grant funding, and simplify the financial reporting requirements. I could never understand who reads all of these reports that you ask us to send to you. I am sure that there is somebody out here that does. Chairman Thompson. Senator Lieberman reads most of them for us. Governor Thompson. I am sure you do. Senator Lieberman. Actually, they are behind us. Governor Thompson. Just like I do as Governor, all the reports that come to me. As Governor of the State of Wisconsin, I have dealt with a wide variety of Federal restrictions that prevent my State from reaching its full potential and advancing the best interests of our citizens. From welfare reform to health care, States like my own of Wisconsin have become America's laboratories of reform, instituting dozens of innovative initiatives that have made our programs models for the Nation. Yet, I have had to travel to Washington, as most governors do, to solicit on bended knee the permission to implement landmark reforms. I am not alone. My experience and the experiences of other State leaders have made the boundaries of the devolution debate clearer today than ever before. Time and time again, we have developed and passed legislation to deal with our unique problems, only to be rebuffed by the Federal Government. Let me briefly describe some more recent issues to illustrate the frustration at the State level. The integrity of the 1996 welfare reform agreement is threatened by attempts by some people in Congress--nobody on this Committee, I am happy to be able to announce--and the administration to reduce the funding and to restrict the flexibility of welfare-related programs, including the temporary assistance for needy families, more commonly referred to as the TANF block grant. In 1996, Congress, the governors, and the administration entered into an historic welfare reform agreement. In exchange for assuming the risk involved with accepting the primary responsibility for transforming the welfare system from one of dependency to self-sufficiency, governors agreed to 5 years of guaranteed funding, along with new flexibility to administer Federal programs. In my own State of Wisconsin, we reduced the welfare caseload by over 91 percent. Any attempt to change welfare reform-related programs or the funding, to me, is a serious violation of that commitment and of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, and certainly would undermine the States' welfare reform efforts. In Wisconsin and throughout America, welfare reform has demonstrated that States can best solve the problems when given the flexibility and support. Congress gave the States the freedom to design their own welfare replacement programs, as well as the block grants to support them. As a result, hundreds of thousands of families are climbing out of poverty and pursuing their piece of the American dream. Then 3 weeks ago, 3 years after the act was passed, the Department of Health and Welfare in Washington passed the rules saying a lot of the things we are doing are just not proper. Even though we were moving and doing things, the rules reduced our flexibility, 3 years after a lot of us had already had the act up and running. CSG and the Nation's Governors urge Congress and the administration to reject any proposals that reduce the funding or restrict the flexibility for welfare-related programs. But I would like to compliment you, Senator, and all of the Members on this Committee because much has been accomplished since the 1997 meeting, but much more remains to be done. I was very happy yesterday with our bipartisan meeting, in which you were there, Senator Thompson and Senator Voinovich. I thought it was a wonderful bipartisan meeting in which we were able to put our case on the table and you responded, I think, very eloquently. So already in the 106th session of Congress, the House has passed H.R. 350, the Mandates Information Act, H.R. 409, the Federal Financial Assistance Improvement Act, and H.R. 439, the Paperwork Reduction Act. The Mandates Information Act clarifies the point of order provision of the Unfunded Mandates Reform Act, applying the orders to any cut or cap in entitlement programs, such as Medicaid, food stamps, and child nutrition, unless States are given new or expanded flexibility to manage the cut or cap. The Federal Financial Assistance Improvement Act will require the Office of Management and Budget to develop uniform common rules for 75 cross-cutting regulations, and under this legislation, OMB must also develop electronic filing and management of grants to reduce the paperwork. Just 2 weeks ago, this very Committee held hearings on S. 746, the Regulatory Improvement Act. The Council of State Governments believes that S. 746, cosponsored by at least three Members of this Committee, is a very good move in the right direction. It will provide needed consultation with State and local officials when Federal agencies promulgate new regulations and will require risk assessments and cost-benefit estimates for such regulations. Additional proposals and ideas that are circulating that may further impact the current state of federalism, on March 10, 1999, the ``Big 7'' State and local organization principals signed a letter that was forwarded to Congress in support of the Regulatory Right-to-Know Act of 1999. By calling for an annual report to Congress by the President and the Office of Management and Budget, which analyzes the impact of Federal rules on Federal, State, and local governments, this bill encourages the open communication between the Federal agencies, State and local governments, the public, and Congress regarding Federal regulatory priorities. As you know, Mr. Chairman, the staff of the ``Big 7'' State and local organizations have also been collaborating with staff members of this Committee in an attempt to fashion legislation to protect and to reiterate the partnership between Federal, State, and local units of government. CSG believes that it is important to bring such legislation to fruition, and among the principles we would like to see embodied in such legislation would be prior consultation with State and local elected and appointed leaders in drafting the Federal legislation, the regulations, and the Executive Orders with an inter- governmental impact. Federalism partnership legislation should provide a Federal assessment through federalism impact statements and provide a form of judicial review for enforcement. Ultimately, CSG believes a true federalist partnership must reflect the intentions of the Tenth Amendment, whereby States were granted deference when the Constitution failed to explicitly empower the Federal Government. So, as State leaders concluded in the 1997 conference on federalism, in order for our country to be an innovator at home and leader abroad in the 21st Century, I believe it is imperative that our unique Federal partnership devise improved divisions of labor and achieve strategic inter-governmental restructuring best suited to the changing public policy circumstances that confront us. The States have shown, with the limited experimentation that the Federal Government has allowed, that we can manage complex problems, we can put our ideas to work, and we can do this, reconnecting the American people with their government. Devolution will have a profoundly positive impact on the delivery of government programs and services as the States compete with one another to devise the best system. Its impact on the political process, however, will be equally profound, nothing less than a restoration of the American people's confidence in their government. So, again, I thank you for this opportunity to speak with you today and I look forward to our ensuing conversation. Chairman Thompson. Thank you very much, Governor. Governor Leavitt. TESTIMONY OF HON. MICHAEL O. LEAVITT,\1\ GOVERNOR, STATE OF UTAH, AND VICE CHAIR, NATIONAL GOVERNORS' ASSOCIATION Governor Leavitt. Thank you, Mr. Chairman. I appreciate the opportunity to appear before you on behalf of the National Governors' Association. --------------------------------------------------------------------------- \1\ The prepared statement of Governor Leavitt appears in the Appendix on page 153. --------------------------------------------------------------------------- Federalism and the partnership between ourselves and the National Government is obviously a top priority of ours. We have witnessed over the course of the past several years substantial progress and we want to acknowledge that. We have made major progress in moving from a micro-managed relationship, often imposing a lot of Federal bureaucratic rules, to one that moves toward performance goals and we think that is a very positive outcome. Congress has given us the Safe Drinking Water Act. We stopped the wholesale passage of unfunded mandates, reduced Federal micromanagement. It has given us block grants in welfare and transportation and child health care, etc. We celebrated recently in our State the success of our children's health insurance plan. With some flexibility that the Congress gave to us, we were able to develop our own plan and not use Medicaid. We are able to provide health care, as a result, to twice as many children and provide them with the same health insurance plan that my children have as the Governor of the State, twice as many as we would if we were under Medicaid simply by giving us flexibility, and I think it is a grand example of the way we can work together to provide more efficiency and innovation. This revolution has often been referred to as the devolution revolution. Regrettably, the magnitude, I fear, of this undertaking has been exaggerated at times. A lot of the devolution initiatives have been better in theory than they have been in practice. A lot of the initiatives have been limited in their benefit by imposing a lot of new burdens on States as conditions of funding. There is a new problem emerging. We, for years, focused on the area of the unfunded mandates. Today, my major purpose is to point out to you that in place of the unfunded mandates, the new trend is one of preemption, where the States are having their innovation and their capacity and flexibility withdrawn in a different way. When we were dealing with unfunded mandates, the National Government was compelling the State to do something. With the preemption, they are preventing us from doing what we need to do. Both have the same effect. Both move us away from the basic federalist proposition that our founders developed. Much of this is being done, I might add, in the name of globalization and a movement into the knowledge age. I would like to suggest that we, as a people, are blessed with what could be the perfect form of government for the information age. The world is beginning to work like a group of network PCs. We continue to move forward as a Nation as though we are trying to form ourselves into a giant mainframe. I would like to suggest that that metaphor, whether it is affected by unfunded mandates or by preemption, is the same. The mantra for the 21st Century must be central coordination but local control. We need to think of ourselves as a group of networked PCs. It is the power of the network. It is the power of the innovation that is set forward, the multiple that is created by a set of central capacities with everyone having the capacity to innovate on their own that makes this a powerful system. We may have the perfect form of government for the information age. Once State authority is taken away, it is very seldom returned. Today, I would like to suggest on behalf of the National Governors' Association a series of five principles that we believe will well suit us as we move into the next millennium. The first one is that the principles of bipartisanship must be followed by elected officials at every level. Second, that the partnership between the State and the National Government has to be based on early consultation on anything that would affect the States. That is an element of cooperation in the development of this system of networked PCs. The third is that a legislative proposal's impact on federalism needs to be transparent and fully disclosed before the decisions are made. We have found over time that on many occasions, that the regulations we have to deal with are either imposed by the bureaucracy later or by intent language that was never part of the debate as we go through developing and writing legislation. The fourth principle would be that this partnership needs to be based on an interdependent nature of our government, and that demands an attitude of the highest respect, but also a deference toward State and local laws and procedures that are closest to the people. That is the spirit of the Tenth Amendment. If it was not specifically reserved to the National Government, the power of the people would be respected and the States. The last one would be that these elements of our partnership should have some means of enforcement. Now, in my formal testimony, I point to a number of different examples of legislation that you are dealing with that we believe would move this forward. I will point to one today, and that is the Mandates Information Act, H.R. 350 or S. 427. The bill would clarify that the point of order provision of the Unfunded Mandates Act also applies to any cap or cut in an entitlement program. The States are deeply concerned that programs such as Medicaid, food stamps, and child nutrition will be adversely affected unless the States are given new or expanded flexibility to manage any kind of cut or cap. There are several others that I have mentioned. I will just summarize by saying our message to you and also to the President is we need to move forward with an enforceable federalism partnership between State elected officials and elected officials at the National Government, all levels, and we invite you to join us in reviving this working partnership. Thank you, Mr. Chairman. Chairman Thompson. Governor, thank you very much. Sitting here listening to you gentlemen, it occurred to me again that we could not have two more representative people in this country to talk about this issue. You have both been innovators in your own States and obviously not only know what you are talking about, but you have put it into effect and shown what can be done at the State level when given the opportunity. First of all, Governor Leavitt, I appreciate your pointing out something that I think is hitting home to so many of us here and that is that we are going from having made some progress in the devolution stage of things to running into additional problems with regard to the preemption stage of things. Of course, we have legislation that we are discussing right now, as Governor Thompson indicated, that hopefully will address that, so that at least we take the time to consider the ramifications of what we are doing and face up to it, and second, make sure that if we are preempting the States, that we acknowledge that and give the courts some guidance as to what we are doing. Staying on the devolution part for a minute that we are all proud of, the many things that have happened there, Governor Thompson, of course, is known far and wide for his innovation with regard to welfare reform in his State. You mentioned the Safe Drinking Water Act, health care, the Unfunded Mandates Act, all of those things. I am wondering what your assessment is as to how we are doing on the devolution side of things. We know we have some problems. You mentioned, Governor Thompson, the issue you have with regard to welfare. I would like to know a little bit more about that in your State, the Federal interpretations there. The Unfunded Mandates Act, you mentioned, Governor Leavitt, still has interpretations with regard to how the Medicaid situation will operate in your State. We have also seen that we give lip service to things--the President's Executive Order on federalism. The GAO found that for over 11,000 rules issued between April 1996 and December 1998, the agencies that are conducting federalism assessments for only 5 rules, 5 out of 11,000. Of course, it calls for federalism assessments to be made when federalism issues are involved. So we have a lot of press conferences and give a lot of lip service, but the real question is, how are we really doing? Obviously, we have made some progress we are proud of, but how is it working? What are your accomplishments? What have been your accomplishments? What are your concerns? Where do we go from here, with the block grant situation, moving more and more to that. How is that working? Give us your assessment on how devolution is working so far, an overview, obviously, in your State. Governor Thompson. Governor Thompson. Thank you very much, Mr. Chairman. Devolution in regards to the TANF Act is working, evidenced by the number of people that have been moved off welfare in States all across America, from Maine to California to Florida to Washington. The problem that we are running into right now is that the Department has issued some rules, and when you have a complete reduction in the cases like we have in Wisconsin--we are now down from 100,000 families down to 8,500 families, and those families, 80 percent are in one county, 70 percent are minorities, two-thirds of those individuals have some kind of drug or alcohol problem or a combination of both, 50 percent do not have a high school education, and 40 percent have never worked. So they are really the hardest to place. We are spending a lot more money on individual cases, but the reduction, the total reduction, in order to maintain our effort, because we have reduced it by so much, we have to waste a lot of money just on those individual cases to satisfy the requirements, whereas I would like to be able to take some of that TANF money and use that money to help some people that are just off of welfare, to be able to continue to monitor them, continue to encourage them to work, continue to improve their education so that they can get better jobs and so on. But because the maintenance efforts are so restricted under the rules, we cannot have that. Some things that we put out there that we used to get maintenance effort credit for, the rules that have come down now, 3 years after the act was passed, do not allow us to have that maintenance of effort. So we are getting penalized because we were innovators and doing the right thing, we thought, but now the Federal Government comes in and takes it away. They gave it to us on one hand, take it away from us with the second hand. So devolution is working in welfare reform completely, but now the rules, or the preemption that you and Governor Leavitt have talked about, has taken back some of that flexibility and that is what concerns me a great deal. Chairman Thompson. And it really seems like it happens under the radar screen. We have the big announcements, about welfare reform, but then you say 3 years later, the rules are still coming that dictate---- Governor Thompson. The first time the rules came out, the rules were not out for 3 years. Chairman Thompson. Three years? Governor Thompson. Three years. It is after the fact. We have gone so far down the road, and we have been encouraged to do that by indications from the department. Chairman Thompson. Sometimes, do you find the rules are inconsistent with what you believe to be the intent of the legislation? Governor Thompson. Absolutely, and inconsistent from what we have been led to believe is the position of the Department. But once the rules are finalized, they have taken away the flexibility and have taken away the opportunity for us to continue a program that we had been given the green light, a tacit green light, by the Department, and that to me flies in the face of what you wanted as the Chairman of this Committee and as a member of the Senate when you passed the TANF Act. Chairman Thompson. Governor Leavitt. Governor Leavitt. Governor Thompson has responded, I think, with some wonderful specifics. If I could address your question in a more historic way, more dealing with the history of this issue, obviously, federalism is based on the idea that there would be healthy tensions between the States and the National Government, that both would have tools that would enable us to represent our interests. I would like to suggest to you that a major part of this problem is the States have been really rendered anemic in our capacity to do our constitutional duty. We were historically given four tools to represent the interests of the States and the people against the power of the National Government, as a protection. The first was the Tenth Amendment. No one would dispute, I believe, the fact that over the course of the last 50 or 60 years, the Tenth Amendment has been emaciated by the Federal courts and that our capacity to use the Tenth Amendment, until recently, has simply gone unnoticed by the Federal courts. The second was the direct election of the U.S. Senate. Now, I would not advocate that we go back to the legislatures appointing them, but I think we would all agree that the day that the States gave that up, we gave up a powerful tool to be able to call our representatives back to say to them, we do not like what is going on. You are not representing our interests directly. Therefore, a lot has changed. We have lost that tool. The third was the amendment process. The amendment process looked good on paper, but the reality is, the capacity to amend the Constitution of the United States to rebalance this national power simply is very lopsided because all the power to do that resides with the National Government. The fourth one was the will of the people. The founders, I believe, knew that there was a need on the part of people to be governed closest to them. The devolution, if you will, revolution was about people saying, we desire to have more power at the local government level. You do not hear it spoken of very much and there is a natural creep that will occur by the Federal Government and the States literally being rendered anemic. Because of our tools now being gone, we will inevitably be overrun by the National Government and the kind of bureaucracy that Governor Thompson speaks of. That is the reason we come today to appeal to you that we need to have enforceable federalism. Without it, it is inevitable. Whether it is preemption or whether it is mandates, the effect will be the same. Chairman Thompson. Thank you very much. I know you have to leave shortly. I thought my time was running a little short here and I checked and found out that staff is taking care of you and cutting my time back, so be it. Senator Lieberman. OPENING STATEMENT OF SENATOR LIEBERMAN Senator Lieberman. Thanks, Mr. Chairman. Let me first, if I may, as a matter of process--you referenced to a GAO study on the implementation of the federalism, Executive Order No. 12612. At GAO's request, OMB has prepared a letter providing GAO with its views on that ongoing study and the folks at OMB have asked me to request that this letter be placed in the record, also, which I would like like to do at this time.\1\ --------------------------------------------------------------------------- \1\ The letter dated May 4, 1999, from the Office of Management and Budget appears in the Appendix on page 212. --------------------------------------------------------------------------- Chairman Thompson. It will be made a part of the record. Senator Lieberman. Thanks, Mr. Chairman. Thanks very much for convening this hearing. Thanks to Governor Thompson and Governor Leavitt for being here. Two very thoughtful opening statements. I appreciate that the hearings are being convened, because they do give us a chance to step back and consider in a broader context some of the judgments we naturally make on an ad hoc basis as we consider the whole range of legislation. We sometimes explicitly debate federalism questions by that name, using terms like preemption. For instance, in product liability debates and the Internet sales tax moratorium, which we were involved in together, at least on the discussion stage, Governor Leavitt, there is a lot of focus on the appropriateness of preemption. In other cases, of course, we do it but we do not talk about it. It is implicit. So this is a very important opportunity that these hearings give us to look at the big picture. There is a third panel here of scholars, Professor Galston and Professor McGinnis, that I thought provided very good overviews which are helpful as we go through this. Professor Galston's paper points out historically in this century that you might say we have gone through two different periods. One was when for reasons of history, and you might say necessity, the power of the Federal Government grew, most notably the great depression of the 1930's when the problem went beyond the capacity of the States and localities to handle, and then, of course, the Second World War. But in the more recent decades, though it may not look like it from the State level--and I came here after 16 years in State Government, 10 years as a State Senator and then 6 years as Attorney General--that the trend has been much more in the direction of the devolution revolution, but there is this tension that I think the Framers not only foresaw but intended. Your metaphor, Governor Leavitt, of not making this a mainframe but keeping it a network of PCs is a good one. I suppose on the other end, the other extreme that we should avoid, is to break the network, that is, to not just have millions of PCs out there operating on their own because of the weakness of the National Government. On the question of preemption and inappropriately intruding on the role of the States and local governments, last Congress, as you know, we considered so-called takings legislation, which I thought posed a direct threat to the ability of local governments to exercise their authority in the area of zoning and land use planning. In States like mine, our local governments are working very hard and are very proud of and very protective of that authority, and right now, for instance, there is a heavy emphasis put on acquisition by the local governments, and State, of open space land. I was privileged to join with the Chairman in working to defeat this legislation. But in other instances, deciding whether Congress should prevent State and local governments from acting becomes, at least for me, a more difficult question. This goes directly to something that Professor McGinnis and Professor Galston talk about in their papers, which is the intention of the Framers in creating the Federal system to protect continental free trade, that it is on a continental-wide basis, national trade. Professor Galston in his statement urges us to be open to the possibility that economic and technological changes of our day, such as telecommunications, the Internet, interstate banking, may require a reconsideration of some of the established Federal-State relations in certain areas. This is a very complex question, but with the opportunity to step back and look at the big picture, I wonder if you have any suggestions about how we should weigh our varying responsibilities, Federal and State, for doing what the Framers clearly intended us to do, which is to maintain not only a continental market but a free market, as it were, while at the same time not encroaching on the appropriate areas of responsibility for State and local governments. I am thinking here specifically of the area of commerce, interstate commerce. Does either one want to take a shot at that? Governor Leavitt. Governor Leavitt. I actually do have some thoughts about that, Senator. I think that you have identified what may be the challenge of this generation of governance. We are approaching what I think is the new frontier of federalism. We may have to reinvent federalism, given the fact that we are now in a time when borders have less constructive meaning than they did before. We are having to find new ways of creating checks and balances in a Nation that has relied on borders that have defined us, and we no longer may have that option. I would like to suggest one way that that can occur best. Aristotle used to speak a lot about the golden mean, which he defined as being the place between two vices, the natural tension between them. That is the basis of our federalism. I still believe that the place that you are referring to is that golden mean between them and it can only be found if both the States and the National Government have the capacity to resist one another in their effort to find it. The big problem we have right now and the reason we are drifting toward a mainframe type of government as opposed to a group of network PCs that really characterizes the information era is that the States are anemic. We do not have the capacity to resist the National Government. We are essentially told what we will do in almost every case, and the only resistance we have is to come to places like this and talk. As we try to pioneer this new frontier of federalism, we have to find ways for the States to be able to resist the Federal Government, to find those places, or we will end up with a system of government that will not be consistent with our point. Senator Lieberman. Thank you. Governor Thompson. Senator, if I could just add something very quickly, something that has really bothered me and I think it is starting to really concern a lot of people, I know it has Governor Leavitt, who has been a leader in this, but the fact of the new telecommunications, the new Internet commerce that is developing, there is the tremendous impact that is going to adversely impact the States. That is, as this new commerce is developing, the sales taxes that States are going to receive are going to diminish and it is going to get worse. The only people that can really help us are you. We are so fearful of the situation where we may end up being like the European common community, where the States in Europe have to go to the Federal Government to get all their revenue and you have to fund us because you have taken away our sales tax resources. I do not think you want that. We do not want it, and are very concerned about that. So we need some way to be able to communicate with you that we have to redevelop this federalism. The second point I would like to make is that we also have to do something as it relates to the administrative agencies, because I like dealing with you and I can usually convince you to go part way with the position of the States, but once it leaves your hands and goes over to a department, to some bureaucrat there that is going to promulgate the rules, like they have in TANF, we are left out. We have no recourse whatsoever. So we need some sort of assurance, some sort of protection under this new commerce and under the administrative agencies to be able to get our views out there and to be able to have an equal voice somehow with the Federal Government. Chairman Thompson. Gentlemen, the clock has run on our vote, I think. If we do not leave right now, I do not think we are going to be able to vote. Senator Lieberman. Thanks for your very thoughtful responses. Chairman Thompson. I know that Senator Voinovich and Senator Collins are going to be back, if you would bear with us. I know you have to leave early. Senator Levin. Could I find out when they do have to leave? In terms of my return, I would be interested. What is your schedule? Governor Leavitt. Regrettably, Senator, I will have to depart soon. Chairman Thompson. I think we were talking about 10 o'clock. Senator Levin. This is deja vu from yesterday for me, I am afraid. Usually, deja vu goes back a few years, but this does not. Governor Thompson. As Yogi Berra says, deja vu has got to be repeated all over again. Chairman Thompson. Whichever Senator returns first will reconvene. Governor Thompson. Thank you very much. Chairman Thompson. Thank you very much. I guess I will not get a chance to go over my chart with you, but I put that up there for your benefit, so just absorb that and use it in whatever way you might want to.\1\ --------------------------------------------------------------------------- \1\ The Chart entitled ``Federal, State, & Local Taxes Collected Per Person,'' submitted by Chairman Thompson appears in the Appendix on page 214. --------------------------------------------------------------------------- Governor Thompson. Thank you, Senator. [Recess.] OPENING STATEMENT OF SENATOR VOINOVICH Senator Voinovich [presiding]. We will reconvene the hearing. The other Senators will be back in a couple of minutes. One of the real challenges of being a new Senator is figuring out how you can get to the floor in the fastest fashion without getting lost. We were in the question period and Governor Thompson had to leave. Governor Leavitt, in terms of preemption legislation, what are you most concerned about in terms of preemption that is going on right now on the Federal level? Governor Leavitt. Senator, may I say that, I think, for the most part, it is the trend and the practice generally that concerns me. There is a momentum about a willingness to do it. It is in taxation authority of local government. We saw that potential with the Internet Tax Freedom Act. Gratefully, it was mitigated substantially from its original form. It is in the area of utilities, in the area of education--it is a new trend. Frankly, I think it is based on--we have talked about unfunded mandates. That is a philosophy of compelling State and local governments to do things. In many cases, preemptions are a desire to prevent State and local governments, but both of them have the same. Those are some of the categories I would point to. Senator Voinovich. I know that many people are in support of Senator Thompson's preemption legislation. How do you think that would have made a difference in terms of the issue of this Internet taxation problem, or Internet Tax Freedom Act? Governor Leavitt. It very clearly impacts the States' capacity to provide for our basic services. If the States lose the capacity to tax, the States lose the capacity to govern. Initially, the original legislation that was proposed would have literally withdrawn all local taxation authority and then would have, by legislation, given back minor pieces. I think under Senator Thompson's proposal, that could have never reached serious consideration in the Congress because the States would have been able to ask their friends in Congress to be able to impose the teeth of the law and it would have given us a means by which we could have pushed back. The tension, the healthy tension, the checks and balances that were intended by our system would have been provided. The mantra needs to be enforceable federalism. Senator Voinovich. In other words, if the preemption legislation had been in effect, the people that drafted the Internet Tax Freedom Act and the committee that reported it would have been really forced at least to look at the issue of preemption---- Governor Leavitt. That is correct. Senator Voinovich [continuing]. Probably something that did not occur to them until after they were off and running. Governor Leavitt. Plus the consultation, I think, would have been part of pointing that out. Senator Voinovich. One of the things in which I am interested, and I hate to get into specifics, but there is some difference of opinion among some of the Committee Members in terms of whether a rule of construction--a legislative piece that says the presumption is that this legislation was not meant to preempt, or regulation was not meant to preempt, unless it said so explicitly, would be adequate without having a point of order. Would you like to comment on that? Governor Leavitt. I am not able to comment on the parliamentary throw-weight of the provision, but I can say that all the construction provision is a reflection of the Tenth Amendment. It is a statutory acknowledgement that the National Government has a limited role and that unless it is an enumerated responsibility of the National Government, it should be left with the States and the people. That was a condition of our Constitution in writing. It is part of the Constitution and we ought not to blanch at all in having Federal legislation that acknowledges and gives it its full due. Senator Voinovich. The administration, as you know, last year changed their federalism Executive Order and then backed off from the changes. Could you bring us up to date on just where that is in terms of the White House and negotiations between the State and local government organizations? Governor Leavitt. The White House did propose a new federalism Executive Order that was deeply alarming to the States because it--well, first of all, it removed all reference to the Tenth Amendment and would have made substantial changes in the interaction between States and the Federal Government. By retracting it, they set into place a new process where they are working right now with the Big 7 to determine if changes are needed to the existing federalism Executive Order. They believe that there are changes necessary. The States and local governments would argue that there are no changes needed to the existing federalism Executive Order. There are no changes that are imminent, but there is an ongoing discussion between the Big 7 and the White House. Senator Voinovich. Do you think anything is going to be done prior to the President's term of office ending? Governor Leavitt. That is unknown to me, but again, I would say that the position of the States and the National Government is that the burden needs to be placed on why it needs to be changed. We see very little reason for us to make any substantial change in the existing federalism Executive Order that has served us since the Reagan administration. Senator Voinovich. I, for the life of me, cannot understand, with all the problems that they have, why they are bothering with this issue, particularly when there is such a unified opinion among State and local government officials that it ought to remain as is. That deals with this problem, because it talks about Federal agencies and the way they ought to approach things, does it not? If the Federal agencies were familiar with the current federalism Executive Order and honored it, some of the things that this legislation proposes to deal with might not be problems. Governor Leavitt. The current federalism Executive Order, if it were honored, does essentially what the construction rule that you spoke of earlier would do for legislation. It indicates that unless there is a clear, enumerated responsibility of the National Government, the National Government does not have a role and ought to honor the prerogative of the States and local governments. The amended order, as it was proposed, would have reversed that completely. Again, it is a matter of where the presumption is. Their proposed order would have reversed the presumption. I would argue that, over time, Congress has reversed the presumption. That is the reason that there is a need for this legislation, because it would formally reverse the presumption again to be what was consistent with that of the founders, which is the Tenth Amendment. Unless it is a specific enumerated power, it belongs to the States and the people. Senator Voinovich. I think one of the things that would help me, and I think Members of the Committee, would be to have your Big 7 organization come up with some of the most potentially onerous preemptions that are being considered currently and also to perhaps share with us some regulations that either have passed or are being anticipated that highlight why this kind of legislation is needed, because so often, when you do not have specific examples of it, you do not understand the problem. Governor Leavitt. Senator, that is something we would be happy to inventory and provide. Senator Voinovich. The other thing that I am interested in is the unfunded mandates relief legislation, and for the most part, it is working in Congress. However, it was also supposed to deal with regulations in the various departments. I think where those regulations were over $100 million, it required consultation with State and local government people. Would you like to comment on how that is working? Governor Leavitt. Well, it is not. We heard earlier from Senator Thompson that in the last 11,000 Federal orders, only 5 have had federalism assessments, only 5. So it is clear to me that provision of the law is being essentially ignored. Senator Voinovich. I might suggest that perhaps the State and local government coalition convey that to the President and to the administration. I think so often what happens, as you can well imagine, being a governor, is there are a lot of things that are scurrying around in agencies that you are responsible for, but it never gets to the top. People stop you and say, ``Gee, did you know this,'' and you look at them and say, ``I do not know anything about it.'' I think perhaps part of the problem is that, too often, we do not get that message to the White House and share the concern about, for example, Donna Shalala and the new regulations on the TANF legislation and how we think it would restrict the ability of States and remove some of the flexibility that we have had to do some innovative things that have really made a difference for the people that are receiving welfare in our respective States and have helped take them off the rolls. Governor Leavitt. Senator, I think you make a very valid point, in that there is in any government a culture, and it takes a long time for the culture to be changed. We have gone through a period of more than 35 years where the culture of federalism has essentially been squeezed out. The legislation we are talking about, the whole idea of a devolution revolution, was really about the process of beginning to reinstill federalism as a meaningful part of the culture of our government. It is a mindset. It is something that you carry in your mind and in your heart, not just on the statutes. It is a desire to have things conducted at the local level where they can be. We have operated with a default to the opposite. All roads have tipped to Washington. Until we are able to instill in the hearts and minds of the bureaucracy, and then have enough capacity for the States to formally resist, that will continue, and that is why the efforts that you are making and others on this Committee are so deeply appreciated by those of us in States and local governments, and I would argue by the people of this country, because there is an innate desire on the part of people to govern themselves. This culture of federalism that has been squeezed out of our government is in direct confrontation with that idea. Senator Voinovich. The preemption legislation, in my way of characterization, would be a defensive effort. We have had great success with devolution of the welfare system and I do not think Congress fully appreciates what States have done with Medicaid. I know in our State, 2 years ago, our Medicaid costs were less than they were the year before, for the first time in 25 years, and the Federal Government is saving a great deal of money because of that. That is because of waivers and the elimination of the Boren Amendment. But I think that some of that information ought to be made known to the members of the Senate, because, again, the Boren Amendment meant nothing and we got it changed, but States and local governments should be really emphasizing how much money the Federal Government is saving because of what we have done in Medicaid. Governor Leavitt. We did not even get started on Medicaid the way we should have. There has been progress, but Medicaid remains one of the most inefficient, wasteful things that the National Government does. It is a great thing to be able to take care of the health care needs of the poor, but if the Federal Government would turn Medicaid over to the States and allow us to manage it in the way we have welfare, we would be talking about hundreds of billions of dollars of savings over time. I referenced earlier the child health insurance plan in our State that we were able to implement and not be required to use Medicaid. I do not know if you were here, Senator, but we are able to cover in our State twice as many children, double the number of children, and give them the same health plan that the Governor of our State has for his children than if we were forced to use Medicaid. We could do the same thing for the working poor. If the National Government would give the State of Utah a waiver that would allow us to manage our Medicaid program, we could begin covering the lives of the working poor. Today, there are many in our State who work hard but do not have health insurance because they cannot afford it. The recipe for having health care in our State is oftentimes not to work, and that is wrong. Senator Voinovich. I think, again, you should be pointing out to the members of the Senate and Congress about how the CHIP program that the governors fought to have flexibility for has allowed you to do this. In our State, in Ohio--we are going to 200 percent of poverty and the people who are participating--it is still a Medicaid program because we have had some good experience with it, but the fact is, they are paying part of it now. I think we are reducing some of the benefits a little bit. But because of the CHIP program, we have had the flexibility. So I would just suggest that as often as you can, you ought to highlight how this devolution is, indeed, helping the Federal Government with their financial problems and also how it is helping you to do a better job in taking care of our respective customers, because so often, as I am sure the Chairman knows, the stuff is all on pieces of paper and if you do not have the examples of it, then you just kind of take it for granted. Governor Leavitt. Thank you for the opportunity to do it today. Senator Voinovich. I yield to the Chairman, and I understand you have a plane to catch. Chairman Thompson [presiding]. Yes, Governor, you have already stayed past the time which you indicated that you could, and we appreciate that very sincerely. I am not going to detain you any longer. Governor Leavitt. Mr. Chairman, may I present both of you with a copy of a report that has been done by the Big 7 of the seven State and local organizations entitled ``Governance in the Digital Age, The Impact of the Global Economy, Information Technology and Economic Deregulation on State and Local Government.'' It is a series of reports that we are putting out that I think you would find very helpful in your discussions.\1\ --------------------------------------------------------------------------- \1\ The publication submitted by Governor Leavitt is retained in the files of the Committee. --------------------------------------------------------------------------- Chairman Thompson. Very good. We will make both of those a part of the record. Governor Leavitt. Thank you. Chairman Thompson. Thank you very much, Governor. We sincerely appreciate your being here. I would like to turn now to our second panel. The first witness will be the Hon. Daniel Blue, Jr., the senior Majority Leader for the North Carolina House of Representatives and the President of the National Conference of State Legislatures. Our second and final witness on this panel will be the Hon. Clarence Anthony, the Mayor of South Bay, Florida, and the President of the National League of Cities. We appreciate you traveling here today, gentlemen, to share your testimony with us. Representative Blue, would you like to begin, please, sir? TESTIMONY OF HON. DANIEL T. BLUE, JR.,\1\ MAJORITY LEADER, NORTH CAROLINA HOUSE OF REPRESENTATIVES, AND PRESIDENT, NATIONAL CONFERENCE OF STATE LEGISLATURES Mr. Blue. Thank you very much, Mr. Chairman. Good morning to you and Senator Voinovich. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Blue appears in the Appendix on page 163. --------------------------------------------------------------------------- As stated, I am serving this year as President of the National Conference of State Legislatures and it is in that capacity that I appear before you today representing the 50 States as well as the commonwealths and territories. I also appear today, Mr. Chairman and Senator Voinovich, on behalf of the Big 7 organizations. As you know, we have over the last several years had close consultation with you on many issues, and, in fact, over the last couple of days, have consulted over many common issues. In response to that, or with respect to that, we have basically favored six bills that are pending before the Congress now. Some of them have been alluded to by Governor Thompson and Governor Leavitt a little bit earlier. This morning, I want to limit my discussion to the last of the six bills that we talked about in the written submission that I made to you, and that is the Government Partnership Act. We think that passage of that is important because it deals with the problem of Federal preemption of State and local law, and NCSL and the Big 7 truly believe that that is the most vexing of our current problems in dealing with State-Federal relations. I want to, before I give the reasoning, state that there are three things that we are trying to do in the legislation that we are supporting. We are calling for legislation that deals with the problem of preemption of State law by doing the following three things: The first is that it would provide the Congress with more information and better information about the preemptive effect of proposed legislation before that legislation is enacted. Second, it would establish a process for making it much clearer to agencies and the Federal courts as to what the Congressional intention is when legislation is enacted and especially what that Congressional intention is with respect to the area of preemption. Third, we think that there needs to be some procedural aspect that allows you to know when proposed legislation has the effect of preempting State or local authority. Let me just hit a few high points because we think that preemption, as we have experienced it over the past several decades, is a direct threat to our constitutional system of federalism, and the problem is two-fold. First, let me say that it results from the propensity of the Congress, of the courts, and Federal agencies to preempt State law without carefully thinking about what the impact is and how it may affect State and local governments and their ability to participate in this Federal system. But second, and I think more pervasively, it results from Federal agencies and the courts in entering into this field of implied preemption, where there is no clear indication as to what the Congress may have meant. As you know, there has been a whole body of law, case law, that has developed on this doctrine of implied preemption. So we think that there needs clearly to be some procedure that makes clear what Congress means when it enacts laws and makes clear whether it intends to preempt the field so that State legislatures will know that we are forbidden from entering into those areas. The cumulative effect of all of this Federal preemption in both regards, one, when there is simply not sufficient information, or at least not sufficient thought as to what the ramifications are, and second, not the direct Congressional preemption but with Federal agencies and with the courts, we think that it has reduced the effectiveness of State and local governments. We simply have too many policy options taken away from us. As you know, the benefit of the concept of federalism, as Governor Leavitt talked about from the Tenth Amendment, is it gives us the opportunity as State and local governments to experiment, to figure out specific solutions for specific problems and to adjust those as things change. We can deal with them much more rapidly than you can at the national level. Our agencies are better suited to deal with them more quickly and deal with their unique nature. So we think that the ability to test something in one jurisdiction is what makes it basically our ability to make this system work as well as it does. In our own organization, that is, in the National Conference of State Legislatures, we have two major committees, one, the Assembly on Federal Issues, the other, the Assembly on State Issues. The Assembly on State Issues essentially deals with ideas that have started in one State or one locality and it sort of works its way through the marketplace of ideas with legislative bodies around the country. We constantly borrow or appropriate each others' ideas that work, ideas that are unique to a specific State, a best practices approach. I think what we are coming to find is that there is an inability to always use these best practices because some preemptive effort, quite frankly, limits our ability to be creative. One would argue that we have a .900 batting average when it comes to stopping some of these bills over the last decade or two that may have been preemptive, but the cumulative effect of all of that, even if you have a .900 batting average every year, is at the end of a decade, you still have had 10 areas preempted. Slowly but surely, that takes away the ability of those of us at State and local government to be as effective as we could. Let me suggest that the harm done is perhaps even more considerable than I am alluding to, because, again, I talk about the slowness and the sluggishness of the process by its very nature when you have preempted us at the State level and decide to transfer power up to the Federal level to deal with a broad range of issues. Two other things and I will close, because I think that I want you to understand clearly that I grew up in the American style and NCSL is not challenging the ability of the Federal Government to preempt or the wisdom of the Supremacy Clause. I happen to agree with it totally. It would not matter if I did not. But the point is that we are not challenging or questioning the wisdom of preemption. What we are simply saying is that where there is a direct conflict, as articulated by the Congress, or even a direct conflict as you ran into in Gibbons v. Ogden, we cannot challenge whether you have taken away the States' ability to operate in that area. But where there is not a direct conflict between State and Federal law, when there is not a clear articulation of the intent of Congress to take away our ability to act in an area, we propose that there ought not be any presumption of preemption or there not be any preemption allowed. What we need to do, to reiterate the three points that I raised earlier, is have legislation that says, before Congress will preempt State law, it will be well-informed about the implications, it knows fully what the implications are to State and local government, so that there is a discussion about it, some consideration of the Tenth Amendment, some consideration of the roles that we play in this Federal system. Second, that the internal process that you develop through this legislation would make it clear to the agencies and the courts when you intend to preempt, again, wiping out the field of implied preemption, which has become so pervasive in the whole area of preemption. And third, by giving guidance to the courts and to the agencies by simply saying with a strict rule of construction, when we have not said as the U.S. Congress that we intend to preempt, then there is an irrefutable presumption that there is no preemption. As a practical matter, I think that really goes to the heart of the problem, because, again, if you review the case law closely, you will find that it is only in the implied preemption cases where we are vastly losing our ability to deal with the issues facing the people of our various States and our various localities. So if, in fact, this Senate and the Congress takes action along those three lines, we think that it will address the very serious flaws that we see in the current approach on preemption. I want to thank you, Mr. Chairman, and you, Senator Voinovich, for giving us an audience from the standpoint of the NCSL and the Big 7 to talk about these issues that have been vexing and perplexing issues to us, at least during my tenure in the legislature, which covers about 2 decades. I think that if you enact this kind of legislation you will strengthen the hands of State and local government, and you will also strengthen the hands of the Congress, especially as it relates to the courts and to the Federal agencies, because your intention as you enact legislation will be specific and clear and will give them direction as to how they ought to proceed. I thank you for giving me the opportunity to testify before you today. Chairman Thompson. Thank you very much, Representative Blue. I sincerely appreciate that. We will now call on Mayor Anthony. I am going to overlook the fact that Mayor Anthony's son, on behalf of the University of Florida, beat the University of Tennessee, back a couple of years ago practically single-handed. He reminded me of that yesterday. I am going to overlook that fact and welcome him here today. Mayor Anthony, I appreciate your being here. TESTIMONY OF HON. CLARENCE E. ANTHONY,\1\ MAYOR, CITY OF SOUTH BAY, FLORIDA, AND PRESIDENT, NATIONAL LEAGUE OF CITIES Mayor Anthony. Mr. Chairman, I feel more welcome now that you noted that point, and I will congratulate you and Tennessee for your year of champion reigning. It is a great opportunity. --------------------------------------------------------------------------- \1\ The prepared statement of Mayor Anthony appears in the Appendix on page 171. --------------------------------------------------------------------------- Good morning, Mr. Chairman. For the record, my name is Clarence Anthony. I am Mayor of South Bay, Florida, and I am honored to serve as President of the National League of Cities, representing the Nation's towns and cities throughout our great country. I am here this morning with my colleague to discuss whether we can achieve a more effective partnership to benefit our mutual constituents. We want to begin by thanking you for convening a session yesterday to start this dialogue so that we can continue to understand where the fundamental changes may occur in regards to our relationship at the Federal, State, and local level. We are grateful to you for your recognition of the importance of this issue, not just to us, but to our citizens and to all Americans. The changes, both those ongoing and pending, in the Executive Branch, on the Hill, as well as by the regulatory agencies, could have long-term impacts on State and local governments, so we support fundamental changes in policy direction, many of which you have either authored or supported, to ensure more efficient and effective possible services to our citizens and taxpayers. At the time of our Framers, when we were discussing the issue and the fashion of the Federal system and federalism, it was clearly a long journey through the mud and swamp from the White House to the Capitol. But as we look at Federal policy and the changes, it is a matter of microseconds in regards to information and technology and the borders that we have to deal with as we deal with the relevant system of federalism that exists today. The most powerful trends affecting our future are international trade, deregulation, and information technology, and this morning, Governor Leavitt has already noted the report looking at the impact of global economy, deregulation, and information technology on the structure of State and local government. Yesterday, we had an opportunity to talk about what are the variables and what are the challenges that we are going to be facing, and clearly, we came up with some ideas that I think were revolutionary and will take some time to dialogue and to come to conclusion on. For that reason, this morning, we join the Nation's Governors as well as my colleague, Representative Dan Blue, in making clear our commitment to creating a more enduring governmental partnership. Let me make it clear that we support the Mandates Information Act, the Federal Financial Assistance Improvement Act, the Regulatory Improvement Act, and the Regulatory Right-To-Know Information Act. These are critical steps in this new information age to making a better process available for all decision makers, and we thank you, Mr. Chairman. These may seem like small steps, but they are critical and crucial to the future of our relationship on all the levels. We hold as our highest priority, not only in our association but amongst our Big 7 organization, a broader effort to redefine our intergovernmental partnership, and for that reason, we are pleased about your leadership on the Government Partnership Act of 1999, along with the crucial and critical assistance over the past few months from Senator Levin, and, of course, I often refer to him as former president of the National League of Cities, Senator Voinovich. This bill marks, we believe, one of the most important efforts to fundamentally rethink the nature and relationship of our Federal system. Our members overwhelmingly support legislation that requests that we halt the new trend of major preemption of a historical tradition of State and local governments and responsibility as one of, again, our top priorities. No issue in 1999 is more likely to affect the bottom line of local governments and local government budgets and services than preemption, and the rights of citizens in cities and towns across the Nation than Federal efforts to preempt those historical and traditional municipal authorities. This is an issue city leaders will confront in the Federal courts, the Congress, and the administration, and at independent Federal regulatory agencies. We believe the recent trend of Supreme Court decisions, the Safe Drinking Water Act, the Unfunded Mandates Reform Act, and the education FLEX legislation, demonstrate the possibilities of a more effective and efficient partnership. We note that at a time when it has become more difficult for the Congress to act on environmental legislation and the issues themselves have become increasingly complex, Congress unintentionally creates a greater role and authority for Federal agencies to set and direct Federal policy. As we look forward to the issues that will shape the next millennium, we think it is important to secure a system where we have a greater reason to work together. Whether the issue is tax reform or electronic commerce or electric utility deregulation, any Federal action can have enormous consequences on States and local governments. We are pleased that the model set by this Congress of consultation first, joint efforts to achieve bipartisan consensus, and action which provides for pre-assessment accountability and enforceability is a model for the future. So we recommend a few things. We recommend that the Committee consider the adoption of the pending set of federalism bills scheduled for markup next week. We recommend the introduction of the Government Partnership Act of 1999 to act as a follow-up to the Unfunded Mandates Reform Act of 1995. And, clearly, we are grateful for the leadership of the Chairman, Senator Voinovich, and other Members of the Committee, and we hope that we go back to the 200 years in Philadelphia where the Framers clearly provided the responsibility of local government to serve the people, our constituents, and to help you to serve your constituents, as well. Mr. Chairman, we thank you for this opportunity. Chairman Thompson. Thank you very much. Sitting here listening to you, it occurs to me that while a lot of people point out that we are living in a more complex society with technology and so forth, the global economy, is pushing us away from federalism and inexorably so, that they overlook the fact that another change that is taking place in this country over the last couple of or 3 decades is the increase in the quality of our government at our State and local levels. At the State level, for example, we have more and more time devoted by the legislature. Some people do not think that is necessarily a good thing, but most people, when they look at the level of education, the level of time spent, the salaries and things, all of the indications that you might look at in terms of what kind of people you are getting into those areas, it is coming up all the time across the board. So there is much more capability in every sense of the word at the State and local level than we used to have, so therefore, a better ability to deal with some of these issues. While there are some forces pushing in the other direction, there are some real important forces, I think, still pushing in the direction of recognizing the benefits of federalism. I appreciate both of your references to what we are doing here in this Committee. We have tried to make a real statement and a real contribution to this. Everybody seems to give lip service to the concept of federalism and the laboratories of democracy and the government that is closest to the people is best and all that, but we are really trying to do something about it. As you point out, in our next markup, we are going to be considering a regulatory accounting bill, which will indicate, from your standpoint, among many other things, the impact of regulation on State and local government. We will attempt to pull together in one place the extent of regulations and what it is doing with regard to State and local government. The Regulatory Improvement Act that you have talked about will require more consultation with State and local governments. We would be requiring, in appropriate cases, cost- benefit analyses and risk assessments and things of that nature, not requiring anybody to make their decisions based on that, but at least having the information there, having some peer review, having some open discussion, some transparency, including discussions at an early stage with State and local governments before they are all locked in and there is really nothing you can do about it. The grants management bill will help with regard to the administration of grants. All these things are coming up next time, and I think they are all a part of a bigger picture and I appreciate your endorsement of those. Of course, there is the Government Partnership Act, as you mentioned, on the question of preemption. Again, what we are trying to do there is not come down with a heavy hammer and say, you have got to do it this way or the States and local governments always prevail. All you are basically saying is, first, before the Federal Government makes a determination that we are going to preempt in an area, that we give it some consideration as to the ramifications of what we are doing, and second, to make sure that we intend to do it. We are apparently preempting in areas that perhaps we did not even intend to preempt, thus the doctrine of implied preemption. So a lot of good things are happening and I think that one of the things we need to do, if we can move forward with the Government Partnership Act, is consider whether or not we should be in some way formally contacting your associations and having some discussions with regard to major changes that we might make in these areas as we do our assessments of the impact and so forth. I do not know how we are going to know that unless we contact you, so I look forward to us working together on those things. As you look at it, you are looking at it from the State and the local level. Representative Blue, you mentioned that perhaps we are doing more harm than we realize. That intrigued me. Also, you mentioned in your written statement that the Federal Government is not always effectively protecting the public, even in the environmental public health areas. You indicated there might be some abdication there on their part. Most people kind of look at the Federal Government and say, well, we have got to depend on the Federal Government totally to protect our health and environment. I take it from what you are saying that you do not necessarily subscribe to that totally. Could you elaborate on that a little bit? Mr. Blue. I think there are many instances in which State governments, especially, and to a more limited extent, local governments, can intrude into the environmental area. When you start talking about air quality on a large scale and issues like that, clearly, there is a need for Federal involvement. But when you start talking about more stringent requirements at a State level, you talk about something over and above whatever the minimum requirements are that the Federal Government or a Federal agency may impose, State governments and local governments ought to be free to experiment from that platform, to add things to enhance the quality of life of their respective citizens. Essentially, when I say ``abdicate'' in my statement, I meant it is not that the Federal Government has not entered into the field and has not legislated to some limited degree in an area. But in many instances, the ability of State and locally-elected officials to deal more seriously with specific problems, I think, is infringed upon sometimes when the Federal Government preempts the area and prohibits or prevents our government from entering in and enhancing whatever it is that you may be trying to achieve at the national level. Chairman Thompson. That was part of the debate, for example, in the Safe Drinking Water Act. The Federal Government was requiring the locals to test for things that did not---- Mr. Blue. That did not grow anywhere within 2,000 or 3,000 miles, I think. There is something happening in Hawaii and you have to test for it in Oklahoma and Nebraska, or somewhere in the Midwest. It did not make a lot of sense. Chairman Thompson. It shows that we can move off the dime eventually when we are faced with that, and with regard to that, welfare reform, unfunded mandates, Ed-Flex in the education area, and so forth. From the State area, and you, Mayor, from the local area, just on a daily basis, what are the biggest problems that you face or that you see that are presented by not recognizing sound principles of federalism, areas where you see the Federal Government preempting, that your citizens would be better off if there was not preemption or more flexibility on the State or the local level. Does anything in particular come to mind? Mr. Blue. Let me cite one specific for you. Just last week, we were debating in my legislature the issue of health care, and every time that issue comes up, we are confronted with what does ERISA do. Hundreds of court cases over the last several years have basically determined that certain areas in ERISA dealing with health care are off limits to State legislatures. We cannot do anything about it. Now, I do not know that there is any specific, at least as I recall, specific prohibitions in the actual Act that say that we are totally preempting the field---- Chairman Thompson. I think you are. Senator Edwards. Especially in ERISA. Chairman Thompson. Yes. Mr. Blue. But I am talking about when we start talking about HMOs that are not dealing with major employers and you have got an ERISA plan. But every time you start a debate on health care, you run into at least what is perceived as some preemptive effort on the part of the Federal Government or Federal agencies. One of the things, I think, that Governor Thompson may have mentioned, the TANF grant, from an NCSL perspective, we are not as bothered by the regulations, because, quite frankly, our staffs were in constant consultation on developing the regulations. I know NCSL staff was, because I was consulted off and on. The principles may not have been to the degree that we should have been across the country, but from a staff standpoint, I think we probably won 90 percent of the battles that we engaged in on the TANF regulations themselves. But I think that it underscores a bigger point, and that is, as long as we know that before a decision is made, that we are consulted and we are at the table when the discussions are going on, it highlights what the difficulties are and it highlights where you are infringing on what we perceive to be State territory or local territory. Chairman Thompson. That is one of the things we are trying to address in the Unfunded Mandates Act and one of the things we are trying to address in the Regulatory Improvement Act. Mr. Blue. Absolutely. Chairman Thompson. It is early consultation. Mr. Blue. Sure. Chairman Thompson. Mayor Anthony. Mayor Anthony. The areas that I think local government tends to be affected by, and it probably transcends a lot of areas, because we not only have to deal with the Federal regulations but we oftentimes find ourselves being challenged by the State regulations. So we are, for lack of a better term, dumped on a couple of times as stuff rolls down in the process. Clearly, in the environmental area, it has always been a challenge that we are required to implement policies from the Federal and State level without funds being given to us. I think that is working a little bit better in some States, in some counties, but that continues to be an area. When it comes to things such as construction and trying to provide the municipal financing, there are stringent requirements that are not only placed on local governments by the SEC but the IRS and the process that we have to go through is oftentimes very cumbersome. I have often said that good policy for local governments that is created by the Federal Government and the State Governments are good policies when money is attached to it. Oftentimes, we are seeing issues such as the ADA, which I think is good policy, but there are a lot of requirements on the State and local government to abide by this legislation but no process or mechanism to provide us the resources to implement. So, yes, great policy, but it is not great policy when there is money not attached to it. As, Mr. Chairman, you have noted by your chart, the revenue that has increased for the Federal Government has not continued to increase at the same level as that of the local level. The differences really become more obvious when you take a State- by-State or government-by-government parallel with this chart. The Federal Government continues to grow at this point. State revenue grows here, and the local county and city revenues have not grown. They have basically decreased as it relates to your taxes collected. Chairman Thompson. So that red line there is basically State growth more than local growth, is that right? Mayor Anthony. It combines both and it makes the percentages look good in terms of the State and local, but if you pulled the local level out, as you will see when you get a chance to review this chart, we have the State revenue of California that has grown--Federal is at about 22 percent. The State of California is about 5 percent, and Santa Clara County City has decreased 5 percent. Chairman Thompson. What are you referring to there? Mayor Anthony. That is the pamphlet, the executive summary of the global---- Chairman Thompson. That is a part of our record, is it not? Mayor Anthony. Yes, it is a part of your record. Chairman Thompson. OK. Mayor Anthony. So your chart, as amplified, is very correct and on point, but it is amplified by just the State level. Chairman Thompson. That is a very good point. Thank you very much. Senator Voinovich. Senator Voinovich. I have had a lot of opportunity to talk with Mayor Anthony about our mutual concerns. As I mentioned to Governor Leavitt, I think that if the National Conference of State Legislatures and the National League of Cities could give some really good examples of where preemption has hurt and preemption that is being contemplated now will hurt, I think it would give a lot more impetus to passage of Senator Thompson's legislation. I think that many members of the Senate just are not familiar with the problem. I think the more you can do that, the better off we will be. The anecdotal thing on the Safe Drinking Water was the fact that we had communities testing, adding 25 new things every 3 years whether they needed to be tested for or not, so that you could not concentrate your money on the things that really mattered. Some of those kinds of anecdotal things are very helpful to members of the Senate and it is important that you communicate those to your respective Senators or get your members to so they understand there is a problem out there that needs to be addressed. This is kind of off the subject, but it sure does deal with federalism, and that is the TANF program. That program has been very successful. On the other hand, you know that in many States, the surpluses are building up and there are many people in Congress today that are looking at that with some interest in maybe taking some of the money. I would be interested in your response. Mr. Blue. Certainly, our response would be to urge you not to take it, because we think that as part of legislation several years ago, when we agreed to accept less to do more with it in exchange for the flexibility, and besides that, I want to point out that in North Carolina, we had gotten waivers before the new legislation and had had a jump start on trying to reduce the welfare rolls and I think that we have been very successful. I listened to Governor Thompson's numbers. We have not gotten 91 percent of the people off, but we have been extremely successful, and I think that to come in and reduce the amount now when we are getting to the most hard core of those on the welfare rolls would be a little unfair to the States that have really put forth the effort, the local governments that have maintained their effort as best they could, and we ought to have the ability to try to go ahead and totally correct the problem. But let me address one other issue that you raised, because we will have our staff pull together all of the instances where we think that preemptive efforts or lack of respect for federalism adversely affects State and local governments, but I want to underscore again the point that Governor Leavitt was making about what impact e-commerce is going to have on the ability of State and local governments to remain viable partners, especially State Governments, in this State-Federal partnership. It perhaps poses the biggest threat to our ability to generate the revenues to come up with innovative solutions to problem solving of anything that we have seen in our recent history and it very well may redefine the whole relationship between States and the Federal Government. When we look closely at the numbers, we certainly know that in basically putting a stand-still order in place, saying that we are going to study what the impacts are, Congress did not mean to tie the hands of State legislatures, or for that matter, local governments, because indirectly, they are impacted by their inability to collect property taxes as shopping centers start feeling the real pinch of e-commerce. But I would suggest that preemption in that area alone, by saying that the State Government cannot do what State Governments normally would do or local governments regarding a stream of revenue is something that was not intended, something that entered into the debate further on in the discussions, but something that was not intended by enactment of legislation. Without moving urgently and, I think, very quickly on that, the size of e-commerce will be so great that it will be very difficult to really protect States' interest in a stream of revenue that States absolutely have to have, since we are so dependent on sales tax revenue to finance the services of State Government. So when you talk about specific examples of preemption without a specific statement at least early on in the discussions as to an intent to do that, I think that is right now the most vivid one. Senator Voinovich. I really do not think that members of Congress understand the full impact that that is going to have on our sales tax revenues in our respective States and how important that source of revenue is to being able to provide basic services, and particularly in the area of education. One of the things that is puzzling to me is why we do not have more lobbying being done by the National Education Association and the American Federation of Teachers on this issue. I think that, again, you need to really dramatize this issue and its threat to the basic source of revenue that so many States have in order to provide services for people. Congress should understand, if it evaporates, then the pressures are going to be on Congress to come up with some other source of revenue to take care of that, and that means that they are going to have to get into the issue of some other taxation to compensate for the loss of revenue that you have. I think when people finally understand that, they may take a lot more interest in trying to work out some fair solution to State and local government and also to make sure that this is not an encroachment on electronic commerce in this country or even internationally. But it is a major threat to federalism because if you do not have the money to take care of the problems, then you are in bad shape. Chairman Thompson. That is really hitting home in my State right now. We are projecting shortfalls in the future. There is a lot of discussion going on as to what we should do about it in terms of our tax structure and so forth. But one of the things that has got to be figured into that is to what extent the Federal Government is preempting sources of revenue and to what extent they are causing the expenditures of revenue which could go to solve our problem. I can assure you, that is one of the things that I am going to be looking at. Mayor Anthony, did you have a comment on that? Mayor Anthony. I was just going to follow up on the basic service issue. It clearly does impact especially States like Florida which relies a lot on the sales tax in order to carry out services, and it will impact the teachers and services, police, fire, and basic services. I agree with Senator Voinovich--we have not been able to bring the partners to the table the way that we need to to get this issue out and available to people to understand. I am one that uses the e-commerce to be able to order my books and my wife uses it for books and other things, so it is a challenge when I say to her, you know, we are not providing taxes to be able to help local government. She says, oh, so I am not paying taxes if I order on e-commerce. So that is the reaction. We have to be able to find a new method of engaging other associations on this issue or we are going to see a continued loss, in not just Tennessee but States throughout this Nation. So we are partnering. The Big 7 has a campaign that we are trying to engage others in this dialogue. In regards to the issue on welfare reform and the process, I agree with Representative Blue. We are just beginning to see the successes in the States and counties. But I do want to share with you that this is the time now, since the economy is good and unemployment is low, that we deal with a population that we have not dealt with truly, and that is those that truly are impoverished. It is easy in a sense to look at the numbers, but if we looked at the numbers in regards to the unemployment of those that are in the inner cities and minorities, African Americans and Hispanics, those numbers continue to be high. So as we celebrate, we need not celebrate totally until we are able to get those rural communities and those pockets of people who have not participated in the prosperity of America like most have. That is the real challenge. So I do not want our arms to be tied at this point by more preemption and more regulation and less flexibility. This is truly the time that we can test ourselves to see if we really are bringing prosperity to all Americans as we approach the year 2000. Chairman Thompson. Thank you very much. Senator Edwards. OPENING STATEMENT OF SENATOR EDWARDS Senator Edwards. Thank you, Mr. Chairman. I might add that I share many of the beliefs that you and former governor and Senator Voinovich have expressed this morning. I do not know why it is that we believe here inside the beltway in Washington that we are so much smarter than the State legislatures back home and the local governments. My experience has been that these folks are thoughtful, they are on the ground, they know what is happening, and they make good decisions about what needs to be done. Let me also add that I wanted to come here because Dan Blue is here, an old friend of mine, a colleague. You all have been referring to him as Representative Blue. He was the Speaker of our House, and so those of us who know him better refer to him as Speaker Blue, one of the best Speakers we ever had in the history of the North Carolina legislature. He is an old friend and colleague and someone who commands tremendous respect in the leadership community in North Carolina, so we welcome you. Mr. Blue. Thank you. Senator Edwards. Let me ask a couple of specific questions, and I will start with you, Speaker Blue. We have talked a little bit about this issue of preemption and your concern about preemption, and I fully share that concern. Can you give us some specific examples, and I am particularly interested in North Carolina, where preemption has created a real problem, for example, in the area of education. You mentioned health care, for example. I know right now the North Carolina legislature is engaged in discussion of a patient's bill of rights and HMOs and those sorts of things, and ERISA is obviously a real impediment to the efforts in that area. But, for example, any ideas about things you have encountered in the area of education? Mr. Blue. Nothing specifically comes to mind, except there are a lot of regulations regarding different classifications of students in public education. We have had some debates about that. I will not say that we are preempted. It is just the regulatory requirements that we run into and spending money the ways that we think may be more effective to address certain student populations. I will give you another area perhaps where preemption has bothered us, or at least we think it has. In the area of transportation, there has been a lot of debate. There was some debate about drivers' licenses requiring Social Security numbers and issues like that that directly conflicted with North Carolina law, and we thought without any valid reason, privacy issues and things like that where we have made a specific public policy finding that we wanted to preserve certain aspects of privacy. You get Federal law preempting without any clear indication on the part of the Congress that you want us totally preempted in that field. It is things like that that we get the midnight phone calls on, and a wide range of issues. I think, again, to answer your question directly, it would be much easier if I just list all of the various things, and we will get that to you this afternoon as they come to mind. I will call my staff at home and get the specific instances. I was looking at the broad effects and the cumulative effect of preemption in sort of a vacuum, somewhat, without looking at the specifics, but I will get that information for you. Senator Edwards. I think that Ed-Flex, for example, which was mentioned by the Chairman, was a good step in the right direction, but it is just one step that needs to be taken. There are many steps that need to be taken to remove some of these bureaucratic strings that are tied to Federal money that goes to State and local governments so that you all can use this money more efficiently. I mean, you are there. You are living there. You know what is happening. Mr. Anthony, can you respond to that question, too, some specific areas that you have seen? Mayor Anthony. Senator, first, I was going to ask you, would you like to be a mayor, because you sound as if you would make a great local government official. Senator Edwards. I have to see if I like this job, first. Mayor Anthony. As Representative Blue has already noted, there have been strings in the educational area in regards to stringent requirements, and you can go into the construction of schools, you can go and get examples in regards to specific curriculums that are required. But can I give you a great example? There are States all over this Nation that are taking charge and making sure that the flexibility that is there, they are utilizing it. For example, if we look in the education area, there are State legislators and governors all over this Nation that are having special sessions funding education because that is an important priority to their State. Other States are having special sessions on environmental policy because that is a specific interest in that State. Counties and cities are having special revenue directed for sensitive lands. In Palm Beach County, where I am from, we created a taxing authority for children's issues, children's services taxes. These are examples to show that if we have the flexibility and if we are not preempted by the requirements of the Federal Government, we deal with our issues based upon the concerns and the desires of the people that live in those communities, and I think that that is the real model that we would like to be able to share Nationwide and that Congress understands. Cities, States, and counties in this Nation are not usurping their responsibility. In fact, if we are concerned about education in our State, if you are not preempting us and giving us all of the additional requirements, we will have a special session and we will put money into education if that is our State priority. But we would like that flexibility, and some cities around this Nation are buying sensitive properties through a general obligation bond of the citizens of that community because that is their interest. So there are some examples and models throughout this Nation that I hope we keep in mind through this process that are working. As you said, Mr. Chairman, government officials all over this Nation are prepared to provide the services, Senator, that our citizens want. Senator Edwards. The word that comes to mind is a word I have heard the Speaker use on occasion, is empowerment. It seems to me that we want less of our Federal tax dollars spent on this bureaucracy up here in Washington and more of it spent to empower State and local governments to do the kind of job they need to do and are well-equipped to do, in my judgment. Do you agree with that, Speaker Blue? Mr. Blue. I agree with that, Senator. And the other thing, when we look at the wide range of issues, it is further empowerment, but also allowing us to use a power that at least historically we have had or perceived that we have. If you just look at the areas where preemption gets to be a hot topic, at least in NCSL corridors, it is tort reform, areas that traditionally have been the domain or bailiwick of the States. Right now, we have serious discussions on what kind of preemption there will be to insulate various entities from Y2K potential tort liability. Those are issues that States are best suited to deal with. Those are issues that, historically, States have been empowered to deal with. To have the Federal Government intrude in that area, whether it is commerce or other areas, and preempt us out of the fields, we think does not serve the purposes of the Federal system that we are a part of. And you can go down the list, of product liability and a wide range of different issues where there has been serious discussion of preempting State authority to act in ways the States are best suited to act. Senator Edwards. I could not agree with you more. All I have to say, I have ultimate confidence in State and local governments' abilities to act in those areas and to act intelligently and thoughtfully and with respect to their specific local concerns, which is what I think we ought to all be thinking about. Let me just say, Mr. Chairman, thank you very much. I want to say thank you to Speaker Blue. Mr. Anthony, thank you for being here. It is always an honor for me to be in the presence of our Speaker. Mr. Blue. Thank you. Chairman Thompson. Thank you very much. Senator Lieberman. Senator Lieberman. Very briefly. I am sorry, gentlemen, I had to be in and out. I thank you for your testimony and your interest and your leadership generally. I was actively involved in the activities here that led to the moratorium on taxation regarding Internet sales, and part of the reason for the moratorium was the complication of the issue. I do not know whether you have any thoughts today about it, but we are taking some tried and true federalism principles that have been applied to interstate commerce, but we are applying them to this extraordinary new highway, as they say. The question that puzzled a lot of us, because we see this trend developing--more and more sales going on e-commerce and, therefore, more and more revenue being deprived to the State and local governments from sales tax--but whom do we tax and how do we do it? Does the sale occur in the place where the person is sitting in front of their PC? Does it occur in the State where the headquarters of the seller is? Does it occur maybe in some third State where they have their warehouse from which they dispatch? Does it occur, as some have alleged, where the Internet service provider happens to be located, where all the connections are happening? It is really serious, and again, having come from State Government myself in a State that has been primarily dependent on the sales tax for its revenue, this has real serious implications. But the question is how to make it rational and fair and not deprive the States not only of the revenue, but, as you have said, of the independence that comes, of the strength that comes with an independent source of revenue. Do you have any thoughts about that this morning? Mr. Blue. I have a few. First, I agree with you that there are some very serious questions raised in e-commerce. You get the situs question, certainly, and it is as compelling as any. Senator Lieberman. Right. Mr. Blue. I think that this may be the kind of situation that does not question the States' rights to a revenue stream but raises a challenge for the States and localities in partnership with the Federal Government and the Congress to come up with some solution by defining those issues and still collecting the revenue. It may cause us to create different kinds of mechanisms for doing what all 50 States are uniquely qualified to do. Every State--well, not all 50, I think there may be four or five States without a sales tax, but that is the one strength of State tax officers and revenue collectors around the country. They are experts in collecting sales taxes. Senator Lieberman. Right. Mr. Blue. We distribute them back to the local government. But it may call for some kind of partnership developed at the national level so that you cannot skip from State to State or deciding the question that we ran into. Congress can deal with that because of its commerce powers while we can at the State level and you can determine how to aid us in doing what we have to do in order to deliver the services to our people. I do not at all question the need for a serious study. The moratorium may have been appropriate. I just would say that if, in fact, it is going to take us a long time to do something about it, the forces build up so quickly that after we have decided what to do, it may be a little more difficult to do it when you are dealing with a $100 billion stream of commerce as opposed to a $5 billion stream of commerce. So we think there is some urgency about it. We know that the Committee that was appointed to look at it has not met. We know about the challenges of its composition. But something has to be done. We have appointed a committee within the National Conference of State Legislatures to study all of the aspects of e-commerce and, hopefully, come up with some suggestions, and recommendations, that we can share with you here in Congress. Senator Lieberman. That is a fair point. Interestingly, your answer reminds me that in all the discussion we had leading up to that bill, nobody was talking about, or wanting, the Federal Government to become the tax collector. It was really more a question of how you rationalize the claims that competing State and local jurisdictions might have to tax this new form of commerce. Even if anybody thought about it conceptually, it was as a way to collect the taxes to then return them to the State and local governments, but I do not think there is much interest here in having the Federal Government develop the capacity or the whole bureaucracy required to begin to collect sales taxes, essentially. Mr. Blue. What we are concerned about, Senator Lieberman, is that we do not experience what so many of us went through in the late 1980's or early 1990's by coming up with a way to tax or to get the revenue from this source that we get from any other sale and 60 days later it has changed its situs. In the 1980's, those of us at the State level addressed the use of incentives that States were giving to lure companies from one State to the other, and we know that with e-commerce, it is easy--in fact, you can move it instantaneously. So from the Federal level, we need some ability to ensure that it does not jump across the North Carolina mountains over into Tennessee and you constantly are chasing an object that you cannot catch. I know that there is serious discussion on us guaranteeing that the VAT tax will be collected for the European Community, and so there may be some other ways that we can look at what we do for States within this structure to collect sales tax on e- commerce. But I am saying that it is the kind of thing that is challenging, but certainly we ought to be able to rise to the instance. Senator Lieberman. To deal with it. Mayor, do you want to add anything? Mayor Anthony. I agree with Representative Blue. Clearly, as local governments, we think that the State level is where it is happening in regards to the revenue collection. The National League of Cities has been discussing and debating this process for the last 2 years in preparation for this commission. We do agree that more research is needed, but the arguments that have been made to create confusion, in a sense, of saying that we have 50 different States and 50 different collection processes is one that I think goes back to the concept that we do not think that State and local governments are able to manage and create policy for their own constituents and their own future, and, in fact, we are. We are prepared to deal with this. I personally think that the State in which the recipient receives the product is where the tax is collected. The report may not, in fact, come back and say that. It may be greater minds than mine, because I am a little country boy from South Bay, Florida, but---- Senator Lieberman. Yes. The Chairman tries to pull that line on me every now and then. [Laughter.] Mayor Anthony. But I think that that is the answer there. But, again, we can go through a process of research to come up with one that I think is appealing to the partnership that we have created through the Big 7 to resolve this issue. Senator Lieberman. Good. I look forward to working with both of you and your organizations on it. Thanks very much. Chairman Thompson. One of the things in listening to that that I am reminded of is the conflicts of law question. I never could figure it out in law school, but it is there. Each State has its own rules as to the conflicts of law that it will apply. You think about the law of contract. Some States apply where the contract was executed, some where it was consummated, some where it was performed. Some recognize that if you put in the contract that this is the State law that will apply. So the point is that States are used to dealing with rather complex situations. There are accusations sometimes of forum shopping and things of that nature that would be under any kind of a system. But we have a rather, for, I guess, at least 150 years or so, a rather complex set of 50 different sets of rules as to how they apply, conflicts of law situations that involve transactions across State lines with regard to very complex commercial transactions. We are not flying blind here. It is nothing that we cannot do. Thank you very much, gentlemen. You have been extremely helpful and we really appreciate you being here. We look forward to working with you in the future. Mr. Blue. Thank you. Mayor Anthony. Thank you very much. Chairman Thompson. Thank you very much. I would like to introduce our third and final panel. Professor John McGinnis is joining us from Cardozo Law School. He will be followed by Dr. William Galston, Director of the Institute for Philosophy and Public Policy. Gentlemen, thank you very much for being with us here today and for waiting through this long morning, but we certainly want to hear from you. Professor McGinnis, would you like to start? TESTIMONY OF JOHN O. McGINNIS,\1\ PROFESSOR OF LAW, BENJAMIN N. CARDOZO LAW SCHOOL, YESHIVA UNIVERSITY Mr. McGinnis. Thank you very much, Mr. Chairman. I would like to make my full statement a part of the record. I am very grateful to be here today to talk about constitutional federalism, which is the cornerstone of our government. I would like briefly to talk about the virtues of constitutional federalism and then about how to revive it. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. McGinnis appears in the Appendix on page 180. --------------------------------------------------------------------------- Chairman Thompson. Your full statements will be made a part of the record, to whatever extent you want to summarize. Mr. McGinnis. Constitutional federalism is the most important structure of our Federal Government. It is a happy paradox that two interlocking governments can lead to better governance but less governance than one unitary State. The way the Constitution does that is to create two sets of governments, each limiting the other. The Federal Government was limited by the enumerated powers. Essentially, the Federal Government domestically was given the power to create a national free market. But that very power limited the State Governments, because the State Governments had to compete in that market. Therefore, any exactions they took from their citizens would tend to cause their citizens to move, or move their capital elsewhere, and so that was a limitation on State governments. But federalism also made governance better. It made governance better because it created a marketplace for governments. States had to compete, to create public goods, the public services that the market and the family cannot provide. There was pressure on them because they were in this national marketplace, this competitive marketplace among themselves to produce better services at lower costs. Finally, the other most important virtue of federalism was that it pushed decisions down to the people. Adam Smith, in fact, said that benevolence is much more likely when people live among one another, and social solidarity and civic responsibility comes most easily in our communities. That is the other reason that federalism is part of a greater principle of subsidiarily, of trying to push decisions down to the people in the smallest possible community. These are very great virtues. Unfortunately, our federalist system in the last 60 years has been very much frayed. In my testimony, I go into the reasons for that, but suffice it to say that we really no longer have a doctrine of enumerated powers. The Federal Government has plenary spending, and regulatory authority, and in my view, the consequences have been extremely unfortunate. The Chairman has put up, I think, a very useful graph, because one of the most important consequences is that both our State Governments and our Federal Government tax and spend less efficiently than they did when federalism was at the height. I will just give you one statistic to show that. When federalism was at the height, which, I think, was around 1910, before the Sixteenth and Seventeenth Amendments, the Federal Government spent around 1 percent of GNP domestically on programs. Today, it spends 17 percent. But it is not only the effects on our economy that are troubling. To me, the most worrying aspect of federalism's decline is the effect it has on our civic life. Because most government happens far away, apart from citizens' communities, citizens feel more alienated and distant from government. And finally, because the Federal Government now has plenary spending and regulatory authorities, there are really no clear demarcations between the State and the Federal Government and that leads to a serious problem in accountability. If both governments can do the same thing, Federal officials can avoid accountability by seeming to make a State official be responsible for the action the Federal Government has undertaken. So what I think we need today to do is to think about how to revive constitutional federalism, to do what Governor Leavitt said, create a new system of enforceable federalism. I am very pleased to support the draft bill of the Chairman of this Committee, which, I think, goes straight to the issue of accountability, the third danger to which the decline of federalism has led us. The problem of preemption today is that the State laws can be preempted without the Congress making a conscious decision to do that, and that is a serious problem. Happily, the Chairman's bill would require Congress to provide reasons in a legislative report for its decision to preempt State law and the bill would also declare that no legislation or regulation would preempt State law unless it expressly so stated or it was in direct conflict. This bill would encourage deliberation before preemption. It would also make it impossible for Federal judges to make decisions about preempting State law without express congressional authorization, and that is very important, because one of the protections the States still have in our system is that representatives are elected from the States and it is important that they make the decisions clearly and expressly to preempt State law. But I must confess that I think this bill in itself is not sufficient to restore constitutional federalism. Unless the Federal Government is constrained constitutionally from spending and regulating, interest groups will bypass States and obtain spending and regulation on their behalf from the Federal Government. One-stop shopping is not only easier, but it avoids the competitive pressures that inhibit States from adopting special interest legislation. Therefore, I would actually like to suggest that many of the other kinds of framework legislation and constitutional amendments that this body is considering to constrain the Federal Government are actually very important pieces of federalist legislation. I would point to the balanced budget amendment in this regard and the amendment which the House of Representatives has recently voted on, and voted with a majority, not the necessary two-third majority, to require a supermajority to raise taxes. An amendment that would restrict both debt and taxes would force individuals and interest groups back to their States. There would be, then, constraints on the ease with which the Federal Government could spend, and the advantage of that would be the Federal Government would again be a limited government and there would be restraints on that graph showing us the taxes that have gone up so far in the past 80 years. And States and localities would become once again the main repository of spending, and competition among them would be revived. Similarly, I think that one should also consider framework legislation and, if necessary, a constitutional amendment to make it very much harder for the Federal Government to devolve regulatory decisions on Federal agencies. If Congress itself has to make the decisions on regulations, the Federal Government can regulate substantially less. And once again, I think that would reinvigorate States, because everyone would look primarily to them for regulatory activity. We need to think of how to reinvigorate States constitutionally. I would add that none of these proposals would get rid of the Federal Government. The Federal Government could still operate to raise taxes, to raise debt, to spend more money, when there was a substantial national consensus. That is what a super-majority rule would require. They could still regulate if they were willing to take the hard work of making the regulations themselves rather than simply delegate these responsibilities to the State agencies. But these two kinds of reforms would once again reinvigorate federalism and bring the States back to their proper place in our Federal system. Thank you, Mr. Chairman. Chairman Thompson. Thank you very much. Professor Galston. TESTIMONY OF WILLIAM A. GALSTON,\1\ PROFESSOR, SCHOOL OF PUBLIC AFFAIRS, UNIVERSITY OF MARYLAND AT COLLEGE PARK Mr. Galston. Mr. Chairman, my name is William Galston. I am a professor at the University of Maryland's School of Public Affairs. I must say, it is an honor for a private citizen representing no one except himself to be invited to testify on a matter of such fundamental importance to our Nation. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Galston appears in the Appendix on page 195. --------------------------------------------------------------------------- As you know so well, federalism is not a new question for our country. Indeed, it is the oldest question. It is the first question our founders faced in framing our Constitution and then in defending it against its many adversaries. Confronted with the manifest inadequacies of the Articles of Confederation, the founders set out to strengthen the power and authority of the central government. They did so for three reasons that have shaped our history, and in my judgment, remain relevant today. First, to enable the American people to promote the common defense and general welfare of the Nation as a whole, as distinct from its parts. Second, to build a continental market free of internal barriers to the flow of commerce. And third, as James Madison emphasized in Federalist No. 10, to defend the rights and interests of individuals and minorities against the potential injustice of local majorities. Not surprisingly, the Framers' efforts encountered staunch resistance from State officials who feared the loss of prerogatives and power if the new Constitution were ratified. In response, the supporters of the Constitution formulated a theory of federalism, memorably articulated in the Federalist Papers. In the interest of time, let me very briefly summarize the key points. First, the system established by the new Constitution is neither a pure federation nor a pure centralized national government, but rather an historically unprecedented composite in which there would be concurrent jurisdiction over many matters, as well as some exclusively reserved to the States or to the Federal Government. Second, the Constitution invites and guarantees an ongoing tension between the States and the Federal Government, a tension that, like the struggle among the branches of the Federal Government itself, helps secure the people's liberties. Third, in this ongoing struggle, the States will endeavor to expand their powers at the expense of the union, as will the National Government at the expense of the States. Fourth, neither party to the struggle enjoys superior wisdom, virtue, or legitimacy. Both are trustees of the people, constituted with different powers to pursue different public purposes, ultimately answerable to the people alone. There is no question that, in practice, Federal power has grown substantially over the past 2 centuries. It is important to understand why. This growth stems in part from classic Supreme Court decisions early in our history by Chief Justice Marshall that established broad, rather than narrow, interpretations of the necessary and proper Commerce and Supremacy Clauses. Federal authority was further expanded by the Civil War, which led to constitutional guarantees for the privileges and immunities of national citizenship, created for the first time in the wake of the Civil War. Growth of Federal Government also reflects key 20th Century developments, such as the rise of an advanced interdependent industrial economy, a national economic emergency that overwhelmed the capacity of States and localities, a series of global military and security challenges, the struggle to secure in practice the rights of equal citizenship guaranteed to all Americans in theory, and the emergence of new challenges, such as environmental protection, that could not be fully addressed by States and localities acting individually. These considerations remain relevant today, in my judgment, and argue for continued vigorous Federal power in the 21st Century. Nevertheless, it is clear that Federal authority is not and should not be unlimited. As James Madison says in Federalist 39, under the Constitution, the States retain ``a residuary and inviolable sovereignty.'' Courts have argued and will no doubt continue to argue about the precise extent of the matters reserved to the States, but the general proposition that the Framers intended a constitutional system with dual sovereignty is not open to serious doubt, and I would add, Mr. Chairman, that in the past decade the Supreme Court, in a series of cases, has endeavored to restore a brighter line between Federal and State authority, particularly in cases concerning the Commerce Clause. It is equally clear from a constitutional as well as practical standpoint that States and localities should play a key role in formulating and implementing public policy, and in my prepared written testimony, I list a number of reasons why. Roughly speaking, the half century after World War II has been divided into two fundamentally different eras. In the first of these eras, for reasons stemming largely from the civil rights struggle, the States were seen as the problem and the Federal Government took the lead. The second era turned this assumption on its head. The Federal Government was labeled the problem and devolution the solution. In my judgment, each of these assumptions represented, at best, a partial truth. It is only recently that our governing institutions have begun to create a new synthesis, a contemporary federalism that balances distinctive Federal and State capacities and is responsive to our changing circumstances. Key examples of this progress include the Unfunded Mandates Reform Act, welfare and Medicaid reform, and the new children's health insurance program. All of these were enacted with substantial bipartisan support in the Congress and could not have succeeded without cooperation between Congress and the Executive Branch. The challenge now is to maintain the progress towards this new synthesis, what Governor Leavitt earlier this morning called the golden mean. To this end and in conclusion, Mr. Chairman, I would urge the following points. First, in many areas, it will prove productive to form a new form of Federal-State partnership in which the National Government establishes general public purposes and provides resources which the States decide for themselves within very broad guidelines how to employ. Second, the National Government cannot retreat from its obligation to protect the rights of individual citizens, whether these rights are established by the Constitution or by legislation. The discharge of this obligation will not always, sadly, be consistent with the preferences of other actors in the Federal system. Third, given the continuing importance of guaranteeing a free and open national market, we must be open to the possibility that economic, technological, and social changes will require the reconsideration of long-established Federal- State relations in particular sectors. Telecommunications, the Internet, banking, health care, and education are examples of areas where such rethinking may well be in order. Fourth, it is likely that not all changes in the Federal system will point in the same direction. In some cases, the roles of States and localities will be significantly enhanced, while in others, the Federal Government may be called upon to exercise new leadership. A uniform approach is unlikely to promote the public good in every instance. Not every assertion of Federal power is justified, but not every restriction of State and local authority is unjustified. I would, therefore, recommend caution in the face of any proposal that represents a generalized presumption either for or against any particular level of the Federal system. Thank you for giving me this opportunity, and, of course, I will be happy to respond to any questions. Chairman Thompson. Thank you very much. Gentlemen, I really appreciate you being with us. We are dealing with fundamentals here, constitutional law, the fundamentals that form the basis of our constitutional law, and we are dealing with the question, essentially, of power, are we not? It is part of our system of checks and balances, our system of federalism, and who is going to exercise the power of government and the kind of balance we strike and so forth. I think that, as always, the philosophical basis on which we proceed with these bills and so forth is very important. We need to think that through. What is it we are trying to do? What direction should we be going in, being mindful of the fact that we are not going to, certainly by legislation, cure all the problems or set things right in and of itself. I think it is a question of which direction we go in. Where are we and what direction do we need to go in? It certainly does seem like the trend has been in a particular direction. There have been fits and starts, but when we look at the areas in which we have had devolution, really, it has to do with giving States a little more authority to implement Federal policy, essentially, is what we are talking about. We celebrate it and I am delighted for it, but that is kind of what we are talking about. I think even the court decisions, like in the Lopez case, for example, the school guns case, well, we solved that by one sentence, I guess, in the next bill that says it does affect interstate commerce, or something like that. It seems pretty clear that the trend and the direction is pretty much one way and by legislation we are trying to, in some way say, ``Wait a minute, let us think about it a little more before we go any further.'' I guess my first question is whether or not because of reasons that people give, such as the technological revolution, such as the global economy, such as the industrial marketplace that we have now, whether or not this is a natural and inexorable force. Does all of that militate toward moving away from traditional concepts of federalism? I mean, is this something that is natural and to be expected? If it is, is it inherently bad? I take it, Professor McGinnis, you think that perhaps it is not necessarily inevitable, that these things perhaps do not necessarily lead one to conclude we should move away from federalism, and that you would think that if we did that, that would not be a good result. Am I characterizing your position correctly? Mr. McGinnis. Yes. I think that is absolutely right, because I think federalism depends on issues about human nature that are unchangeable. Federalism was a way of trying to limit government, and limiting government is a problem of human nature, as I suggest in my testimony. The problem is, we need to have a government that protects our liberties and our property, but a government that is powerful enough to do that can also threaten our liberty and property. Chairman Thompson. The fundamental debate that kicked our government off had to do with different views of human nature, did it not? Mr. McGinnis. That is correct. Chairman Thompson. Can it go back as far as Burke and Rousseau, perhaps, in terms of---- Mr. McGinnis. Well, I think it does. It goes back, really-- I think much of our debate in this country still goes back to Rousseau on one hand and to the Framers on the other hand. Chairman Thompson. And how our forefathers viewed the French revolution and all that, the nature of man. Mr. McGinnis. I think that is right, and our Framers and people like John Adams were very skeptical that you could ever believe in the complete beneficence of government. That is why having a structure in which the governments somehow compete with one another is so crucial, I think, to good government and to limited government. I do not think changes in our technology really transform that fundamental issue. Maybe we have to change the way we deal with things in certain incremental ways, but it does not change the problem fundamentally, because after all, government is still about ultimately the exercise of force, either through enforcing contracts usually, through the police or through the military. And given that it is the exercise of force of some set of individuals over another set of individuals, we have to think about restraining government and new technology really does not change that. I would say that it is harder to protect federalism today for one reason. I think people have less of an attachment to their States than they did in 1787. General Robert E. Lee said, ``I will fight for my country,'' his country meaning Virginia, in the Civil War. That is inconceivable to us today because of changes in transportation, in communication. But that may mean, actually, we may need to make our governmental structures more protective, not less protective of federalism, because federalism is so important to preserve this principle of subsidiarily to protect against the ambition of human nature that is unchangeable. Chairman Thompson. Plus the fact that the cost of being wrong at the Federal level has gone up, has it not, in terms of reaching for solutions to some of these problems. If you decide what that solution is and you impose it on the 50 States, there is a greater consequence to that than if each State was trying to come to its own conclusion on these things. Professor Galston, you suggest that we approach these things with no presumption either in favor of federalism or against it. We all pay lip service to federalism as an inherently good thing. What I take it you are saying is that depends basically on the circumstances. Clearly, each level of government has its proper role. Clearly, they are interrelated and interdependent, to a certain extent, and you have to look at the given situation as to whether or not this particular policy is wise. So does that not leave us with any ability to set a criterion as to what we follow? Should we have a standard when these issues arise as to fundamental principles, as Professor McGinnis suggests there are still present, on which we can bounce these various issues that we are always facing off of? Do you feel that there can be or should be some kind of objective standard that we apply in each of these cases? Mr. Galston. I think that there should be operating presumptions that are appropriate to different policies. So, for example, in the area of education, there is a history in this country which is backed, I think, by our constitutional tradition, as well, that creates a presumption in favors of States and localities and against the Federal Government. That presumption can sometimes be rebutted for cause, but it is clear where the burden of proof lies. Chairman Thompson. Why is that? Is that not rooted in the Constitution itself? Of course, that specific point is not dealt with in the Constitution, but traditionally, it has been assumed that this is a State and local matter based upon the Tenth Amendment or whatever other provisions you might want to look at. Is that not constitutionally based? Mr. Galston. Absolutely. But now consider the example that Senator Lieberman gave a few minutes ago of Internet regulation. It seems to me, it is much harder to approach that question with a clear set of presumptions in one way or another, because on the one hand, you have technological change inserted into the requirements of the national marketplace, which is increasingly functioning in a global economy, as we are all aware, and on the other hand, you have a profound, important, and growing set of interactions with State and localities' ability to raise revenues. So it seems to me it is a question of prudence, judgment, and balance to have a dialogue across the lines of the Federal system to come up with a solution that accommodates the different interests as much as possible, and that is an example of the sort of thing I had in mind. Chairman Thompson. I take it, basically, you would look at it sort of as each side has a competing constitutional basis it can rely upon. One side has the Tenth Amendment; the other side has the Necessary and Proper Clause and the Supremacy Clause and the Commerce Clause. In any given situation, we look at all of that and come up with a solution based upon the facts of the situation, not necessarily historical interpretation as to those particular constitutional provisions. As the Professor points out, the Constitution theoretically remains the same. As we all know, through interpretation, it changes some. Technology is always changing. How do we strike the balance? Then I will let Professor McGinnis comment. Mr. Galston. The Constitution---- Chairman Thompson. I am just trying to get kind of an analytical framework. What do we go through? It is not going to be a matter of, well, what do we think this morning would be smart to do. I mean, we do have a Constitution to deal with. Mr. Galston. We do, indeed, and the Constitution has a text and it also has a history of interpretation, which I alluded to very briefly in my remarks. So, as I think Professor McGinnis would agree, the meaning of the Commerce Clause has been elucidated in a series of Supreme Court decisions stretching back almost to the beginning of the republic. There was a great debate between the forces of Alexander Hamilton and the forces of Thomas Jefferson as to the presumption that should be brought to the interpretation of the Commerce Clause, and I think most historians would agree that the expansive Hamiltonian interpretation won out in those decisions of John Marshall. So that is part of our constitutional tradition. But to get to the broader point, I do believe that in many cases, there will be competing constitutional and policy and prudential considerations which will be attached to different layers of the Federal system and it is going to be a matter of judgment, prudence, and balance to bring them into the most fruitful conjunction that best serves the public interest. I wish I could give you a simpler bright line, but I do not think it exists. Chairman Thompson. Do you want to comment on that, Professor? Mr. McGinnis. I would just like to comment on it briefly. Constitutional federalism cannot only be a matter of prudence. That is illustrated by difficulty with our structure now, because the States really do not have any protections other than at the discretion of Congress, and that in a political sense deprives the States of their few defenses. It makes government bigger because interest groups can always come to the Federal Government and essentially nationalize debates and issues, and that is a problem. The Framers' Constitution did not make federalism a matter of sufferance of the Federal Government, because they would understand if it is not a matter of sufferance the Federal Government would be where the presumption of action always would tend. It would tend to the people who have the most power. It is my sense in looking at the Constitution that these matters were not really settled by Alexander Hamilton or John Marshall but much more by the New Deal court, which largely eviscerated all of the enumerated powers. Before that, there was not the plenary spending authority and plenary regulatory authority in the Federal Government, which we essentially have today. Without some lines, and I have tried to suggest a new way of drawing lines in my testimony, I think you do not have the constitutional restrictions on government which the Framers thought you needed to make the competition work, because they understood that competition will not work if you have one side saying what the rules are, one side both the umpire and the competitor. That is not competition. So that is why I think you need to revive, as Governor Leavitt said, an enforceable federalism. Chairman Thompson. The strength of the National Government, I think, to me, is evidenced by the fact that some of the people pushing in favor of nationalizing some of these rules are normal critics of the Federal Government, and many in the business community in this area because it is much easier to do business under one rule. They look at all these issues in terms of that, what is easier to do business, and it would be. But it goes directly against, many times, in my opinion, concepts of federalism, which you would ordinarily expect them to be supportive of. Senator Lieberman. Senator Lieberman. Thanks, Mr. Chairman. That is a good point. Thanks to Professor Galston and Professor McGinnis for their very thoughtful papers, and thanks to you, Mr. Chairman, for calling them. Professor Galston is someone I have known for a long time. He bears the burden of having spent much of his earlier life in Connecticut. I am pleased to say that his parents are still my constituents, and I have benefited greatly from his work over the years, though, as they say in the preface to the book, I do not hold him accountable for anything I have done with the ideas that he has written. Professor McGinnis, I am becoming familiar with your work and I respect it greatly. Of course, you came to all of our attention as one of those commentators during the recently concluded national trauma. Mr. McGinnis. This is a much happier experience, Senator. Senator Lieberman. That is exactly what I was going to say. It is much more pleasant for you to return to constitutional concepts of federalism. I thought that Professor Galston made an interesting point in his statement, which is that over our history, one of the reasons why the Federal Government's power has grown is, ironically, to protect the freedom of the individual, the equality of the individual, which was, after all, the original motivating force of our founding documents, certainly the Declaration of Independence right of each individual to life, liberty, and the pursuit of happiness. So it is ironic, in a sense, that we have the big Federal Government having entered, particularly in matters of civil rights, to protect the rights of individuals. I wanted to ask you, Professor McGinnis, just to give me your reaction to that, and then to ask Professor Galston, and perhaps you, too, to comment on the point that he makes in one of his four final recommendations, which is that the discharge of this obligation, that is, the obligation to protect the rights of individual citizens, will not always be consistent with the preferences of other actors in the Federal system. Mr. McGinnis. Well, Senator, I certainly agree with the point that civil rights have been a crucial addition to our Federal system. Surely even regulatory federalism as I described it could not work for people who could not move from their States, who could not send their capital from their States, and so the Fourteenth and the Fifteenth Amendment were crucial completions to even a system of regulatory federalism. But they went beyond that in giving responsibility to the Federal Government to enforce rights. I think that system has generally served us well. My own testimony, as you will note, did not call for what actually some people who favor more federalism are in favor of--namely doing away with the incorporation doctrine, for instance, of the Fourteenth Amendment. I think my focus is really on regulation and on spending rather than on rights. I would say that it is not entirely clear to me that every job and title of incorporation has always been good, because I do think there is an experience, as Chairman Thompson has suggested. It is particularly dangerous for the Federal Government to get things wrong, and the Federal Government can even get things wrong on rights. It can get things wrong on the relations between civic responsibility and rights in a variety of areas. So if I were to discuss the incorporation doctrine, which I do not in my testimony, I would try to figure out ways of tempering that and allow some competition even among rights to happen among the States, but with the basic rights being protected by the Federal Government. So I agree, that civil rights are a very important completion of our Federal system. But I think civil rights are really not largely the cause of the pictures Chairman Thompson has given us today, the huge growth in government. My focus on reviving regulatory federalism would not be so much to do away with our centralized structure of rights but our centralized system of spending and regulation. I understand they cannot be completely disentangled from one another, but I think there can be some kind of separation between civil rights and budgetary matters. Chairman Thompson. Professor Galston, I wonder if I could invite you to comment a little bit more on the concept, and also perhaps to indicate that, now that we are in a time where devolution seems to be more in favor, whether this means either that individual rights do not need the protection of the Federal Government anymore or whether they are, in some sense, thereby jeopardized in the face of State and local majorities. Mr. Galston. Let me begin by saying that it is a matter of national consequence when the Federal Government gets things wrong. The Chairman is absolutely right about that. But in the area of civil rights, the Federal Government got things wrong for 100 years not by acting but by refraining from acting, and I think there is an important historical lesson in that. Senator Lieberman. Right. Mr. Galston. So the logic of that argument points in both directions. I think there is a substantial measure of agreement on the general point here, but I do want to underscore something that was in my written testimony. Namely, these rights can be created by acts of Congress as well as by legitimate constitutional interpretation. For example, the Americans with Disabilities Act, I believe is going to have and is already having profound consequences, not all of them entirely welcome, for State and local actors and for the private sector, as well. I have not heard an orgy of reconsideration in the halls of Congress as to the wisdom of that legislation, and that would be a contemporary example where the Congress in its wisdom, across party lines and with full cooperation of the legislature and the executive, created a new, enforceable right, which, whether we like it or not, enhances the power of the Federal Government in many respects. Now, perhaps on this panel, we could renew that debate right now, but I happen to think that it is going to take some prudence in judgment and perhaps even some legal tussles in order to come out with a balanced enforcement strategy for that act. But it is there, and I think, on balance, it is a good thing for those individuals and for the country as a whole that it is there. Senator Lieberman. Thank you both for those answers. Let me take up the discussion that the value, that both of you commented on and the intention of the Framers in creating a Federal system to protect interstate commerce. That inherently involves some limitation of State and local authority. My question is--although I am mindful of what you said, Professor Galston, which is that you are wary in this area of any generalized presumption for or against any particular level in the Federal system, that it is hard to make broad-based rules here--but to continue to maintain the interstate commerce, the free market nationally, inevitably entails a curtailment of State and local authority in some cases. Maybe I will direct this to you first, Professor McGinnis. What is the overview? If you were going to construct some rules here for when we should do that and when we should not--of course, there is a great body of constitutional law in this area and I am asking you one of those questions which your colleagues at your university would give you some good responses for, suggesting the impropriety of the question--what would you respond? Mr. McGinnis. I think, first of all, I would say that as a matter, just if I were to advise you, as a matter of constitutional law, essentially, you can do what you would like in the Federal Government today, as I think Senator Thompson very nicely suggested. Even the Lopez decision can easily be gotten around. In my class, I tell the five ways of getting around the Lopez decision and allowing that regulation at issue in case to go through, consistent with our structure now. So the question really is a matter of prudence under current law, and I would suggest, at least under our current system, that Federal responsibility really is about allowing markets to be open, preserving the free flow of goods and services among States. That is the crucial role for the Federal Government to protect, against regulations that would be parochial in the sense of favoring citizens of one State against one another, they should be done away with either by an act of Congress or even perhaps through the dormant Commerce Clause. But otherwise, I think, in regulations--where there are not spillovers between the States--where the costs of the regulation are borne by the people in the States, either in labor regulation or in some kind of environmental regulation, then I do not think the Federal Government should generally step in, because I think economists have suggested that when there are not large spillover effects between the States, and I would argue that there are a variety of regulations, that do not have a lot of spillovers among the States, that the State regulation imposes costs on wages and people in their States can make a good trade-off between the benefits of regulations and loss in wages. They may make a different trade-off in Alabama and they may make a different trade-off in Connecticut. But that is, in my view, the appropriate distinction between the Federal Government's role and the State's role, the Federal Government simply opening borders and dealing with spillover effects and the States dealing with regulations that largely have effects only within their State, or effects largely within their State. Senator Lieberman. Professor Galston, let me ask you to just comment a bit more and expand on the statement you made in your testimony, which is that we have got to be open to the possibility that economic, technological, and social changes will require the reconsideration of long-established Federal- State relations in regard to the free and open national market. What were you thinking of? Mr. Galston. Well, nothing that the Senate of the United States has not been thinking about for quite some time, and the Congress of the United States as a whole. Jim Leach, for example, has given a series of interesting speeches over the past couple of years suggesting that changes in the national economy, global capital flows, etc., require a fundamental reconsideration of the way we legislate and regulate in the area of banking. People disagree as to the remedy, but I think everybody agrees that we are in a new world, economically speaking, that is going to require some new thinking. Similarly, as we have mentioned more than once this morning, the Internet is changing everything and its impact goes well beyond the very important consequences for State and local capacity to raise revenues. It is reconfiguring relationships in a way that the Congress of the United States is going to have to take cognizance of, in a way that is consistent with our Constitution, the Commerce Clause, etc. I could go on and on with example after example of economic, social, and technological change which is forcing us to rethink and react and do things differently, whether we like it or not. Senator Lieberman. Professor McGinnis, at one point in your testimony, you described the passage of the Sixteenth and Seventeenth Amendments as unfortunate, and I wondered if you believe---- Mr. McGinnis. I did not quite say they were unfortunate. I just said they had consequences that were. Senator Lieberman [continuing]. Consequences which were departures from the intention of the Framers. The irresistible question is, do you think that the direct election of Senators was an unfortunate departure? Mr. McGinnis. Senator, I certainly think that it was an inevitable departure with the sense of the importance of popular sovereignty and popular democracy, and certainly I am not here to urge, particularly before this body, an amendment to get rid of it. But I would say, though, that the amendment had consequences that we have to think of for our Federal system, and I am with Governor Leavitt in that. The whole burden of my academic work is to try to think of new ways of limiting government that are appropriate to our era. You cannot go home again to the original Constitution. You cannot get rid of the income tax. You cannot get rid of the direct election of Senators. But you can think of what is a constant problem in any era, which is how to deal with the Framers' eternal questions about human nature, the questions about how do we protect ourselves from government and make the limitations appropriate to our era, and that is what I have been trying to do in my testimony. So, no, it is no part of my testimony to eliminate them or to say that they were wrong, just to say that we need to do some compensatory work now. Senator Lieberman. That is a good point. Of course, each of our reaction to the Seventeenth Amendment would depend upon our evaluation of the sentiment of our respective State legislatures. But it was a significant change and, of course, had effects on our service since then. Thank you both very much. Mr. Chairman, thanks for an interesting hearing. Chairman Thompson. Thanks very much. I am going to take another minute or two. We touched on some court decisions. Just generally, I would be interested in your views as to the significance of some of the decisions. We pointed out some of the limitations of Lopez, the Pritz decision, a couple of others that seems to indicate that courts, maybe the Supreme Court, is tilting back the other way a little bit. Do you see very much significance in that? Does it portend things for the future? How would you categorize it? Mr. McGinnis. I think there are two issues. I raised two kinds of issues in my testimony, first that the dissolution of federalism has hurt government accountability and second that it has also simply made government bigger because it has given the Federal Government more power. I think on the accountability issue, the court has done a pretty good job, or it has done a fairly decent job of starting to make the Federal Government at least accountable for the decision it makes. Because of the current court Congress cannot, for instance, tell the State legislatures to pass legislation that Congress would like, because that is the basic problem of accountability because people are then confused. Who is responsible for this limitation on our liberty? And I think, similarly, the Pritz case is very important in promoting accountability. However, I do not see that the court has really changed the fact that the Federal Government has plenary, regulatory, and spending authority, and I think, Mr. Chairman, you were absolutely right in just referring to what happened after the Lopez case. You essentially were able to pass the same bill by changing it just slightly, and you could have passed it in a variety of other ways by making it a condition of Federal spending. So I do not think it has changed that, and---- Chairman Thompson. You do not see that there are any new limitations on the Commerce Clause of any substance? Mr. McGinnis. I do not think that they actually restrain the substance of what the Congress can do when it really wants to act, and I think the court really believes it cannot do that because precedent is so much against it in that respect. If it really did that, because the court does not act only prospectively, as Congress does, it would cast out a lot of Federal programs that we have come to rely on, for better or worse. Chairman Thompson. What it did do is elevate the debate a little bit, or cause a debate among a few of us who thought it was worth talking about. So we at least caused them to have to go back and do it again and debate the issue. Perhaps that is a little progress. Do you share his analysis of these court decisions or what they mean? Mr. Galston. I guess my bottom line, Mr. Chairman, is that I think they are a bit more significant than that because I think they represent a change in a way of thinking, which, over time, will have practical and not just theoretical consequences. For about 4 decades after the beginning of the New Deal, I think that we did function juridically as well as legislatively with the presumption that the power of the Federal Government was essentially unlimited and that the General Welfare Clause of the Constitution was the most operative clause of the Constitution. That was the clear lesson of the New Deal in a number of respects. Starting in the mid-1970's, the courts and legislatures, to some extent, began to reexamine that assumption, in my judgment, for good reason. First, circumstances changed, and second, a case could be made that under the influence of a national economic emergency, the court suspended certain niceties which otherwise it would have been strongly inclined to observe, and, indeed, did try to observe for the first 2 or 3 years of the New Deal. So I see a pendulum swinging back, a new balance in the making, juridically speaking. I think that the Lopez decision-- I am not a constitutional lawyer, but I have it right here in front of me and I have considered it very carefully--I do think that the Lopez decision, in trying to restore juridical scrutiny of questions like, what is commerce, anyway, and what is interstate, anyway, and what does it mean to substantially burden interstate commerce, anyway, has put a new set, or, should I say, an old set of questions on the table that we are going to be wrestling with for the next generation, and I would not be surprised in 20 years if you reconvene this hearing if there would not be quite a significant change. Chairman Thompson. As I said, I think it does cause us to at least address the question of whether or not something that has been the province of the States and local communities for 200 years is a good idea for us to federalize. It is happening in a lot of areas. It amazes me, the philosophical positions people get in. We are making decisions up here on our tort law based on whether or not we think there are too many lawsuits and not based on what level of government should be dealing with these, whether or not we want to federalize something that has been the State and local government province for 200 years. So I think the debate is good. The final thing is, and this really calls on your expertise as much as it does your general citizenship, one of the things you both agree on is that observing concepts of federalism would assist in this age of cynicism on the part of the American public. It is something that concerns me a lot. In times of peace and prosperity, we do not pay much attention. Issues of government, in general, are less relevant to us, and we see how quickly things can change and we get our attention gotten in a hurry and we realize, perhaps, that we do need to have some confidence in our government and even confidence in our Federal Government. So anything that we can do to enhance that becomes important. I think each of you agree that the proper observance of principles of federalism would help there, but more importantly, do you, as men of the law, and I know, Professor, you were with the government for a while, do you see that as a problem in society, the level of cynicism, the way people are looking at their government these days? Each of you may answer. Mr. Galston. It is a good thing, Mr. Chairman, you did not put that question to me when there was more time to answer it, because it is the question that interests me most passionately of all that you could have posed. But very briefly, I think we live in an era of almost unprecedented cynicism and mistrust, particularly directed towards our national political institutions. Some of it is warranted; much of it, in my judgment, is not, and I think it creates tremendous problems for self-government and for democracy and it is something we have to take very seriously with everything we say and with everything we legislate and regulate or otherwise do. For that reason, I suggested in my written remarks, and will repeat now, that you can help build trust through empowerment and through participation and through processes of local government which are more transparent, where people can actually see the relationship between their influence in the form of political participation and outputs in the form of public policy to promote the public good. So I think that in current circumstances, there are substantial reasons to devolve as much as can reasonably be devolved, consistent with the general welfare. Chairman Thompson. While I have got you, what other things do you think we should do? Expand on it a little, if you would, the nature of the problem. You have obviously given a good deal of thought to it, as I have. What are the manifestations and what are some things that we can, totally apart from anything else we have talked about, what are some things that you think that we could do to help in that regard? Mr. Galston. No more difficult question could have been posed, but let me just cite a couple of obvious things, all of which you have spoken out on, Mr. Chairman. First of all, although this is enormously complicated legislatively, it is clear that, as compared to 30 or 40 years ago, the American people see a Federal Government more dominated by ``special interests'' and the money behind them than they thought was the case a generation ago and they do not like it. I know of all the practical arguments against legislating in this area, but as a matter of public confidence and public trust, I believe that it is important for the Congress of the United States to address that issue in some way. A second point I would make is that as in war, so in domestic policy, there must be a proportionality between means and ends and between promises and performance. I think it is very important for elected officials on every level, as they are crafting and then selling a program, to be realistic about what it will and what it will not accomplish. I mean, if you promise the new Jerusalem and you have just taken one step out your front door, the American people are aware of the disproportion between promises and performance. It does not breed trust. One other point I would make is that I think a series of decisions made by the political system at every level, including the political parties, has increased the power of the media in determining public attitudes towards government at the expense of participatory political structures, such as political parties. I think the political parties have backed out of the political arena. Forty years ago, they were actual operating structures that connected individual citizens through local and State party institutions, to the national political party, so the political conventions were real and parties were participatory arenas. They have become now shells, and other forces that do not breed public trust, have rushed in to fill the void, and I would think very seriously about---- Chairman Thompson. There is a serious chicken and egg question there, too. Mr. Galston. Yes, there is. But I think it is important to rethink what we have allowed to happen to our political system and its important participatory structures. Chairman Thompson. Thank you. Professor McGinnis. Mr. McGinnis. I think I have a slightly different perspective. I am less, myself, concerned about spending on elections than on the output of government. I think the change to cynicism is caused by a change in what government does. Government can do a variety of things. One, it can focus on public goods. Public goods are those that the market cannot provide, that the family cannot provide, things that benefit everyone. If government is focused on that, and I believe federalism and a whole variety of other structures in our government tried to focus only on producing such public goods-- national defense, protection against crime, infrastructure, to name a few examples--then people are brought together by their government because these things are benefiting them all. On the other hand, if you have a much larger government, a government that consists as, alas, a lot of the spending which is supported by today's taxes does, in transferring money from one group of people to another group of people, then people will be necessarily suspicious of government because that will encourage citizens not to focus on what government can give them to benefit all, but what they can get from some other group of citizens for their own benefit. So I think that is the basic problem for cynicism of government, and, therefore, I would think whatever one's views about campaign finance, it is a mistake to believe that such reform is the real solution to cynicism. Big spending on elections is simply a consequence of big government. Special interests pay a lot of money to the government because there are so many transfers possible from the government, and limiting these transfers is the level at which I think we really need to address it by much more restricting government. I have some sense of that because I am about to go off to be a professor in Italy, and there, when I talk to people, they are far more cynical of government than we are in the United States, and that is because, in my view, their government is even a much less-restrained government than ours. So it is simply not a consequence, I think, of our political system, but fundamentally what government does. A limited government focused on what we have in common makes for people who will feel good about government. A government that is focused on transferring resources from each of us to another divides the Nation. Chairman Thompson. Gentlemen, very well said, both of you. I really appreciate that. You touched on something that has always been of interest to me with regard to the size and growth of government. I really think we need to make some changes in our campaign finance system for a variety of reasons, but a lot of the advocates of changes in that regard, I do not think face up to the fact that the basis for that is what you alluded to, is big government. The reason why the special interests flock to town, and you cannot wade through them some days, and the reason they give such large amounts of soft money is because they have got so much at stake right up here, because we are running everything right up here and the decisions we make are worth millions and millions of dollars to these people, sometimes billions. But my thinking is that there is something we can do about the money coming in a whole lot more readily than we can in changing that big thing around. We have got to do both, though, I think. But thank you very much. This has been extremely helpful and we look forward to working with you in the future. I appreciate it. Mr. McGinnis. Thank you. Mr. Galston. Thank you. Chairman Thompson. We have got a vote on right now. I wanted to come down and chat with you a moment, but we will not have time today, but thank you very much for being here. The record will remain open for 5 days after the conclusion of the hearing. The Committee is adjourned. [Whereupon, at 12:18 p.m., the Committee was adjourned.] FEDERALISM AND CRIME CONTROL ---------- THURSDAY, MAY 6, 1999 U.S. Senate, Committee on Governmental Affairs, Washington, DC. The Committee met, pursuant to notice, at 9:33 a.m., in room SD-342, Dirksen Senate Office Building, Hon. Fred Thompson, Chairman of the Committee, presiding. Present: Senators Thompson, Voinovich, and Durbin. OPENING STATEMENT OF CHAIRMAN THOMPSON Chairman Thompson. The Committee will come to order, please. I welcome everyone to this hearing of the Governmental Affairs Committee to consider federalism and crime control. Today is our second hearing on federalism. The Committee will consider the increasing federalization of criminal law. It is a deeply rooted constitutional principle that the general police power belongs to the States, not to the Federal Government. This was clearly articulated in the Founding Fathers' careful constitutional design. As Alexander Hamilton said, ``There is one transcendent advantage belonging to the province of the State Governments, . . . the ordinary administration of criminal and civil justice.'' For most of America's history, Federal criminal law was limited to national offenses, such as treason, bribery of Federal officials, counterfeiting, and perjury in Federal courts. Yet, in this age of mass media and saturation coverage, Congress and the White House are ever eager to pass Federal criminal laws in order, as Chief Justice Rehnquist put it, ``to appear responsive to every highly publicized societal ill or sensational crime.'' In recent years, there has been an explosive growth in Federal criminal law. A recent ABA Task Force report, entitled ``The Federalization of Criminal Law,'' found that of all the criminal provisions enacted since the Civil War, over 40 percent were enacted since 1970.\1\ --------------------------------------------------------------------------- \1\ A copy of the ABA Task Force report, ``The Federalization of Criminal Law,'' has been retained in the files of the Committee. --------------------------------------------------------------------------- No one really knows how many Federal crimes now exist, but recent estimations of 3,000 have been surpassed by the surge in Federal criminalization. In 1995, the Supreme Court sent a clear message to the Congress in the Lopez case that it needs to carefully consider whether federalizing certain crimes is consistent with the Constitution. But only the following year, Congress--over my objection, I might add--re-enacted the Gun- Free School Zone Act. And there is no slowing in the growing number of proposed Federal criminal offenses, many of which do not even attempt to make the case that such crimes ``substantially affect interstate commerce,'' as the Supreme Court requires. Although a more vigilant court could help preserve federalism, it may be difficult indeed to increase Congress' respect for the constitutional and prudential limits to passing crime legislation. There is growing consensus across the criminal justice system that the increasing tendency to federalize crime is not only unnecessary and unwise, but also has harmful implications for crime control. Those concerned include prosecutors, judges, law enforcement officers, defense attorneys, State and local officials, and scholars. The ABA Task Force report cites many damaging consequences of federalization, as we will hear today. There will be times when enacting Federal criminal laws or placing conditions on receipt of Federal criminal justice funds will be appropriate. But in all too many instances, increased Federal involvement in the criminal law will pose more possible harm than benefit. Many leaders in the criminal justice system are counseling restraint when Congress and the White House consider Federal criminal legislation. We are fortunate to have a distinguished group of witnesses today, and I look forward to hearing their views. Senator Durbin, do you have any comments? Senator Durbin. I will waive the opening statement. Senator Lieberman has a prepared statement for the record. [The prepared statement of Senator Lieberman follows:] PREPARED STATEMENT OF SENATOR LIEBERMAN Thank you Mr. Chairman. Let me start by thanking you for holding this hearing today. The issue of the appropriateness of making Federal crimes out of conduct that is traditionally regulated by the States' criminal justice systems is an extraordinarily important one. And, although you didn't know it when you scheduled this hearing, the topic is also a particularly timely one, in light of the events in Littleton, Colorado and with the Majority Leader having announced his intention to take up juvenile crime legislation on the floor next week. As you have well explained, we in Congress are often far too quick to respond to every high profile crime with a proposed law, and we often don't stop to think about whether Federal action is either necessary or wise. I've reviewed the ABA Task Force's excellent report on this topic, and both it and today's witnesses make a compelling case for those of us in Congress to make sure that we take better account of the differing roles of the Federal and State criminal justice systems-- and of the resource limitations on Federal law enforcement and the Federal judiciary--when we consider crime legislation. With that said, I think we also need to be careful not to overstate the case here. I read with interest the often repeated finding that, of all Federal crimes enacted since 1865, over 40 percent were created since 1970. Although it certainly is an interesting fact, it does not necessarily say to me that we in Congress are doing anything wrong. After all, we probably would find that a far greater percentage of our Federal environmental laws or perhaps even our Federal workplace safety laws have been enacted since 1970, but I would argue that neither those facts, nor the increasing rate at which we have been regulating crime at the Federal level, in and of themselves suggest that Congress is wrongly intruding in matters that don't concern it. After all, as we all know, violent crime has become a much greater problem in America in the latter half of this century, and so it is only natural Congress would begin to legislate on it more than it did in the past. Just as importantly, and as we discussed yesterday, it shouldn't surprise any of us that the Federal Government is regulating more conduct today than it did 50 or 60 years ago and that conduct that once may have been the exclusive province of the States--because it once had almost exclusively local consequences--now is, and should be, regulated on a national scale. We live in an increasingly interconnected Nation, where our transportation and telecommunication systems have allowed seemingly local activities to have increasingly interstate effects, and that is surely so for crime. I'll give just one example. The Bureau of Alcohol, Tobacco and Firearms recently issued a report on the source of guns used in crimes committed in 27 cities across the country. Although the ATF found that the State in which the crime was committed generally provided the largest single source of traced crime guns, a significant portion of guns used in crimes originated outside of the State in which the crime took place. In Bridgeport, Connecticut for example, the AFT found that over 35 percent of the crime guns it traced were originally purchased outside of Connecticut. By raising this issue, I don't mean to suggest that any criminal activity, no matter how essentially local in nature is an appropriate subject of Federal criminal jurisdiction--in fact, I find the ABA's report quite persuasive in many respects. I do mean to suggest that it is enough to say that because the States have traditionally regulated things like drugs and guns, they should continue to do so to the exclusion of the Federal Government, regardless of the changing--and increasingly interstate--nature of drug crimes and gun crimes. I expect today's hearing to be quite interesting, and I look forward to hearing from and discussing these issues with our witnesses. Chairman Thompson. All right. I would like to recognize our first panel of witnesses. We are pleased to have with us today the Hon. Edwin Meese III, who was our 75th Attorney General. Mr. Meese serves as the Ronald Reagan Distinguished Fellow in Public Policy at the Heritage Foundation, and Chair of the American Bar Association's Task Force on the Federalization of Criminal Law, which has given rise, I think, to a new level of interest in this area, and we certainly appreciate that effort. Following Mr. Meese is the Hon. Gilbert Merritt. Judge Merritt presides over the Sixth Circuit Court of Appeals. He is an old friend of mine from Nashville, Tennessee, and we are very pleased to have you here with us today, Judge Merritt. I want to thank both of you for being here. Mr. Meese, would you like to proceed with your testimony? TESTIMONY OF HON. EDWIN MEESE III,\1\ FORMER ATTORNEY GENERAL OF THE UNITED STATES, RONALD REAGAN DISTINGUISHED FELLOW IN PUBLIC POLICY, THE HERITAGE FOUNDATION, AND CHAIR, ABA TASK FORCE ON THE FEDERALIZATION OF CRIMINAL LAW Mr. Meese. Thank you, Mr. Chairman and Members of the Committee. I appreciate this invitation to appear at this hearing on the topic of federalism and crime control. As you pointed out, as a former Attorney General of the United States and chairman of the American Bar Association's Task Force on the Federalization of Crime, I appreciate this opportunity to share some thoughts with you. At the same time, I should make it clear at the outset that these views are my own and do not necessarily represent those of the organizations with which I am affiliated or the policy of the American Bar Association. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Meese appears in the Appendix on page 239. --------------------------------------------------------------------------- As you pointed out, Mr. Chairman, the Criminal Justice Section of the ABA created a task force in response to widespread concern about the number of new Federal crimes that have been created over the past several years by Congress. Its initial objectives were to look systematically at whether there has been, in fact, an increase in Federal crimes which duplicate State offenses, and if so, to determine whether that development adversely affects the proper allocation of responsibility between the National and the State Governments in the very important field of crime prevention and law enforcement. The members of the task force, I would like to explain to the Committee, were selected with the explicit goal of including persons with diverse political and philosophical backgrounds. It was felt that the task force's conclusions and recommendations should be the product of a consensus among respected persons whose views on criminal justice issues generally would vary quite widely. Indeed, Mr. Chairman and Members of the Committee, I don't think you could find in one room as many diverse views as we had in the particular membership of the task force. We included, for example, former U.S. Senator Howell Heflin, and a former Congressman, Robert Kastenmeier. We had a former Deputy Attorney General of the United States, a former chief executive of the Law Enforcement Assistance Administration; former State attorneys general, present and former Federal and State prosecutors, State and Federal appellate judges, a police chief, private practitioners who specialize in criminal defense, as well as scholars for the legal academic community. I would like it to be part of the record of this hearing that we benefited greatly from the very excellent assistance of Professor James Strazzella of Temple University Law School, who served as the reporter for the task force and who was the principle author of the report which the Chairman made reference to. We also had the invaluable research assistance of Barbara Meierhoefer, who handled the collection and analysis of criminal justice statistical data. The task force examined the U.S. Code, data available from a variety of public sources, the body of scholarly literature on this subject, the views of professionals in Federal and State criminal justice systems, and the experience, the rather extensive experience, of the task force members themselves. The task force had several meetings. There was a great deal of work done by individual members on their own. And, of course, we had a great deal of expertise, as I mentioned earlier, including one of the persons who will appear later on one of your panels, Professor John Baker. As the Chairman noted earlier, the task force concluded that the evidence demonstrated a rather recent dramatic increase in the number and variety of Federal crimes. The task force also concluded that much of the recent increase in Federal crimes significantly overlaps offenses traditionally prosecuted by the States. This area of overlapping crimes is basically at the core of the task force study and the report which it has provided. The federalization phenomenon is inconsistent with the traditional notion that the prevention of crime and the enforcement of most public safety laws in this country are basically State functions. There was a nearly unanimous expression of concern from thoughtful commentators that the new Federal crimes duplicating State crimes became part of our law without any request for such enactment from State or Federal law enforcement officials. The task force looked systematically at whether new Federal criminal laws, which were popular when enacted, were actually being enforced, and we determined on the basis of the available data that in many instances they were not, that the laws were passed at a time when there was a great hue and cry about a particular infamous incident, but that later on, when it actually came to the implementation of those statutes, there was very little actual prosecution. So it was in a sense the feel-good enactment of laws, with very little follow-up. The task force also recognized the point that was made earlier by the Chairman, and that is the plea of Chief Justice William Rehnquist who deplored the expanded federalization of crime in his annual report to the Federal judiciary, which was filed last December. The task force found that increased federalization is rarely, if ever, likely to have any appreciable effect on the categories of violent crime that most concern American citizens, and we specifically found that there were numerous damaging consequences that flow from the inappropriate federalization of crime. These include some of the following: An unwise allocation of scarce resources that are needed to meet the genuine issues of crime; an unhealthy concentration of policing power at the national level; an adverse impact on the Federal judicial system--again, having been pointed out specifically in the Chief Justice's report; inappropriately disparate results for similarly situated defendants, depending on whether the essentially similar conduct is selected for either Federal or State prosecution; a diversion of congressional attention from criminal activity that only Federal investigation and prosecution can address; and, finally, the potential for duplicative prosecutions at the State and Federal levels for the same course of conduct, in violation of the Constitution's double jeopardy protection. Mr. Chairman, we would certainly subscribe to your comments as to the constitutionality of this whole business. Indeed, the Framers that you quoted made it very clear that the police power belonged with the States rather than with the Federal Government. It is interesting to note that as early as the 1930's, when this trend began, FBI Director J. Edgar Hoover, probably the most outstanding law enforcement official of our century, pointed out the dangers of a national police force. Even though his allies in the Congress at the time wanted to make the FBI separate from the Department of Justice as an independent agency and give it national police powers, he resisted this because he felt it would be an unconstitutional infringement on the States and instead as a substitute added the National Academy for the training of local and State police officers to the FBI's own training programs so that local law enforcement officers could be trained and then return to lead their own forces at the State and local level. In the course of our deliberations, we received statements from numerous law enforcement organizations throughout the country. The National Sheriffs Association, the National District Attorneys Association, the Police Executive Research Forum, and a number of other organizations provided their views. Uniformly, they supported the conclusions in the task force report that the federalization of crimes already on the books at the State level should be something to be avoided in the future and even to be looked back on, those that are already in existence, and to be considered for extinction. There are many more things I could say about the problems related to the federalization of crime, but they are reflected in the report. And I would ask, Mr. Chairman, that the report of the ABA Task Force on ``The Federalization of Criminal Law'' be accepted by the Committee for inclusion in the proceedings of this hearing or for whatever other purpose the Committee might desire. I have provided copies to the reporter and to the Members of the Committee, and additional copies are being sent for those Committee Members who are not present. Chairman Thompson. Very good. Without objection, a copy will be made part of the record. \1\ --------------------------------------------------------------------------- \1\ A copy of the ABA Task Force report, entitled ``The Federalization of Criminal Law,'' has been retained in the files of the Committee. --------------------------------------------------------------------------- Mr. Meese. I might point out that there are presently pending before the Congress of the United States several bills which would, in fact, continue this trend. The so-called hate crimes legislation, new gun laws that have recently been spoken about, and so on, are examples of this unfortunate trend, and perhaps this Committee, one of the possible results of this Committee's deliberations might well be to raise the issues of federalization of crime in regard to this pending legislation. The task force recognized that the federalization of local crimes is not something that is going to be easily solved as far as Congress is concerned. Obviously, many of these issues are politically popular, and many of them are generated by newsworthy cases that have raised a great deal of attention throughout the country. And it will take a high level of sophistication, a high level of congressional restraint, if you will, not to succumb to the popular trend to say let's pass another Federal law. The Committee has specifically made some suggestions as to how the Congress might deal with this problem. These are included in the report and in my testimony, but let me briefly just summarize them: First of all, to have a recognition within Congress and among the public on how to best fight crime within a Federal system where authority, particularly the police power, is divided between the Federal Government and the States. Second, focused consideration of the Federal interests in crime control and the risks that are entailed in the federalization of local crime, many of which I have already referred to. Third, Congress might well institute some institutional mechanisms to further restrain additional federalization, such things as an impact statement or analysis by the Congressional Budget Office, perhaps, or by the Congressional Research Service, as how to propose new Federal crimes impact or overlap and duplicate State and local criminal laws. In addition, the task force suggested that Congress might consider having a joint congressional committee on federalism. I would suggest, Mr. Chairman, that the deliberations of the Governmental Affairs Committee itself are a very important step along the lines that the Committee had recommended. But the whole idea of a federalization assessment by Congress as it contemplates action on these kinds of laws would itself be a very important step forward. Perhaps another institutional mechanism would be a sunset provision in any new criminal laws where they would automatically expire at the end of some period, perhaps 3 or not more than 5 years, so that they can be tested, first of all, to see whether they have an adverse impact on State laws and, second, to see whether they are, in fact, used very much and whether there is a need. Finally, a means of responding to public safety concerns through Federal support for State and local crime control efforts. Indeed, this has been used in the past whereby many times, if there is a problem at the State or local level, it is a lack of resources, and it would be far better, rather than to pass a new law, a new criminal law that overlaps, if Congress wishes to do something about a problem, to provide block grant funds to local law enforcement to take care of the problems. Another possible remedy that has been suggested would be to require through statute as an element of any Federal prosecution that the U.S. Attorney show in each criminal case before a judge that there is an element of Federal jurisdiction. I believe my colleague on the task force, Professor John Baker, who will testify later, will elaborate on this particular point. In summary, Mr. Chairman, the expanding coverage of Federal criminal law, much of which has been enacted without any demonstrated or distinctive Federal justification, is moving the Nation rapidly towards two broadly overlapping, parallel, and essentially redundant sets of criminal prohibitions, each filled with differing consequences for the same conduct. Such a system has little to commend it and much to condemn it. In the important debate about how to curb crime, it is crucial that the American justice system not be harmed in the process. The Nation has long justifiably relied on a careful distribution of powers to the National Government and to State Governments. In the end, the ultimate safeguard for maintaining this valued constitutional system must be the principled recognition by Congress of the long-range damage to real crime control and to the Nation's structure caused by inappropriate federalization. In the course of these remarks, I have included liberal references to the task force report. Again, let me mention that I alone am responsible for the totality of the views I have expressed today, and the task force report itself is not official policy of the ABA inasmuch as such policy can only be expressed when approved by the Association's House of Delegates. However, in closing, Mr. Chairman and Members of the Committee, let me state that I believe that these comments and conclusions, as well as the recommendations, would be helpful to this Committee and to the Congress in its consideration of the Federal responsibility for crime as well as those areas where the Federal Government should not be directly involved. Thank you for the opportunity of presenting these views before the Committee. I would be happy to respond to any questions as well as both now and in the future provide whatever further information might be of assistance to you in your endeavors. Thank you. Chairman Thompson. Thank you very much, General Meese. Judge Merritt. TESTIMONY OF HON. GILBERT S. MERRITT,\1\ JUDGE, U.S. COURT OF APPEALS FOR THE SIXTH CIRCUIT, NASHVILLE, TENNESSEE Judge Merritt. Mr. Chairman and Members of the Committee, I will be fairly brief. I take my text here from the remarks recently of Chief Justice Rehnquist whose view, I think, in this respect represents a consensus view in the Federal judiciary, perhaps not unanimous but I think a widespread consensus view. And he recently said, ``The trend to federalize crimes that traditionally have been handled in State courts not only is taxing the judiciary's resources and affecting its budget needs, but it also threatens to change entirely the nature of our Federal system.'' --------------------------------------------------------------------------- \1\ The prepared statement of Judge Merritt appears in the Appendix on page 247. --------------------------------------------------------------------------- When you look at the large historical context, you remember that in our mother country there was a time a number of centuries ago that there was a lot of local criminal jurisdiction in England. Over the course of five, six, or seven centuries, all of that criminal jurisdiction has now been subsumed in the central courts at Westminster. There isn't any longer any local jurisdiction in the country from which our legal system arose, our common law system of justice. And we have only been at this enterprise here in the United States, as we know, for a couple hundred years, but we are proceeding apace at a pace about the same as in England. I might say that one of the big problems, somewhat unrecognized, one of the causes of this federalization of crime, is not just elected officials reacting to the last crime that has been given major publicity in the press. There is among the staff in the Department of Justice, among a lot of very good people, a general tendency, kind of an instinct to expand its jurisdiction. It is natural for governmental bureaucracies to expand or want to expand their role and scope. Since my time as U.S. Attorney more than 30 years ago, I have watched the Department of Justice during that time and since then come up with new legislation in the criminal field in response to the demand that we cure some local problem. And we have had a great number of local crimes federalized in that period of time. The answer that the Department of Justice critics of federalization give when called upon is a variation on a theme, and this is kind of the theoretical basis for a continuation of the expansion of Federal crimes. And I quote here from a very able man, Roger Pauley, Director of the Office of Legislation for many years of the Criminal Division in the Department of Justice, and a man who conscientiously promotes this theory. And it is a debatable theory. He says, ``The scope of Federal criminal jurisdiction is not and never has been the proper measure of federalism.'' That federalism is rather maintained by Federal restraint in the exercise of already frequently plenary jurisdiction, for example, over drug crimes, robberies, auto thefts, domestic violence, fraud, extortion, etc., along with Federal limitations placed by Congress on Federal enforcement activities. Now, under attorneys general for many years of both political parties, that position has been one that has been promoted in the staff, at least, and frequently by appointed officials in the Department of Justice as a justification for federalizing new crimes and bringing within the scope of the enforcement power of the Department of Justice new crimes to deal with events that at the time seemed justified. The truth of it really is that since the Department of Justice has become a major Federal bureaucracy with a substantial staff, beginning a couple of generations ago, in the 1920's and 1930's, the federalization of crime has proceeded apace. It is not just the last 30 years or since the Second World War. Bank robbery as a separate crime, the Dyer Act, auto thefts across State lines, and many other Federal crimes were adopted prior to the Second World War. And I think that we overlook one of the major causes of this if we don't attribute it at least in part to the rise of a very substantial Federal permanent staff which instinctively supports many expansions of Federal jurisdiction. Now, I know the Members of the Committee have observations and questions, and I will leave there my own views which I have set out. I would say that there is a set of principles for determining what should be federalized in the way of crime and what should not be federalized. And I think these principles are of long standing. As the Chairman mentioned, they go back to the Founding Fathers. And the jurisdiction ought to be, in my view, limited to the following five areas which I will briefly summarize: One, offenses against the United States itself; two, multi-State or international criminal activity that is impossible--not just difficult but basically beyond that--for a single State or its courts to handle; three, crime that involves a matter of overriding Federal interests such as civil rights matters; four, widespread corruption at the State and local levels; and, finally, crimes of such a magnitude or complexity that Federal resources are required, and that would now be mainly international-type crime. Obviously, the Federal Government has got to get involved in Internet crimes across national boundaries, which is rising, and in money laundering across national boundaries and in international Mafia or international terrorism. With the first thing that should be considered is now repealing a lot of laws that are no longer needed in this area. I think that if this Committee and others in Congress would give some thought to the repeal, it would be certainly a controversial matter. But the repeal of some of the laws that are now on the books and are unused, it would be helpful. Thank you, Mr. Chairman. Chairman Thompson. Thank you very much. Well, I think that every citizen ought to read this ABA Task Force report on ``The Federalization of Criminal Law.'' As General Meese said, it is very much an eclectic group including Mr. Meese, of course--just a few names--Susan Estrich, Howell Heflin, and you mentioned former Congressman Kastenmeier, Robert Litt, James F. Neal, a friend of Judge Merritt's and mine from Nashville, Tennessee, and a prominent lawyer, Don Santarelli. And the conclusions that you came to here really are eye- opening. I think to me, the fact that more than 40 percent of Federal criminal laws have been enacted since 1970, and the fact that we really don't know how many Federal criminal laws there are. Some people use the figure 3,000, but considering the fact that some of these statutes are so complicated and convoluted, it is difficult to tell just how many provisions there are in some of these statutes that have criminal sanctions attached to them, not to mention administrative regulations now. So many of them have criminal sanctions attached to them. It was pointed out over a thousand bills were introduced in the 105th Congress having to do with criminal law--of course, we will talk about juvenile crime a little bit later--many of them having to do with juvenile crime even though there is only about 250 or so prosecutions of juveniles in the Federal system every year. So we are talking about an infinitesimal number here. Between 1982 and 1993, the Federal justice system expenditures were twice that of State and local expenditures. And, of course, much of this deals with matters that are left to the States. And then you deal with the results of all of this, and apparently from all of this there has been no real significant impact on public safety because by the very nature of the Federal system, you can only reach a small percentage of the crime involved. Less than 5 percent of the prosecutions are Federal prosecutions. Many of the new statutes that we pass in response to recent events--drive-by shootings, interstate domestic violence--since 1994 they have been on the books, and I know in 1997 there was not one prosecution brought under either one of those statutes. So, ironically, it seems--and, General Meese, I will let you address this, if you would--that in this area we are federalizing, but it is not enough to do any good in terms of reducing the crime rate, really. We would have to have basically a Federal police force in order to really do some good in that regard. But it is enough to swamp our court system in some respects and violate certain of our principles and increasing Federal presence and power. So usually there is a trade-off. There is some good for some evil here. I have a difficulty in seeing what the good is here in that, as I say, it seems like we are not doing enough to really have any effect on the problem, and yet in trying to do so, we are creating some really disadvantageous situations. Is that a fair assessment? Mr. Meese. Yes, it is, Mr. Chairman. The task force found, for example, that it diffuses accountability and responsibility. People don't know whether to complain to Congress and their Federal Government or to the State legislature and their local law enforcement agency. I might point out in regard to what you said about Federal resources, there are only approximately 10,000 agents of the FBI, about a quarter of the police force of the city of New York alone. We have 500,000 State and local law enforcement officers. It seems frivolous almost to add to the jurisdiction of the FBI such things as deadbeat dads and some of the other similar crimes that have been assigned Federal jurisdiction by Congress over the years. Likewise, there are fewer Federal judges in the entire Federal judiciary than they have in the State of California. And, again, even a few cases or a small number of cases can swamp those Federal resources. But the real problem is it makes the public think that something is being done when actually there is really very little impact on public safety itself. Chairman Thompson. Well, I think maybe the greater problem is the fact that it may be swamping our resources. We are dealing now daily in the newspaper with the allegations that our most sensitive nuclear secrets over the past 50 years have been stolen, have been subject to espionage in this country. There are allegations concerning the nature of the investigation, whether or not it was effective. Everyone is in turmoil about it. And we are passing things like the Animal Enterprise Terrorism Act, the Odometer Tampering Act, and theft of livestock. We have federalized those areas now. Senator Durbin. Cattle rustlers. Chairman Thompson. Cattle rustlers, and guns in schools, a battle we had last year, where every State in the Union has already got a law in this area. Now we apparently want FBI agents going around and monitoring your local school house in every rural district in the country. So we clearly have got our priorities messed up in that regard. Judge Merritt, with regard to the court system, some say that because we don't use these laws that we are passing, the federalization that we are doing now, that it hasn't had that much effect on the courts. Can you talk a little bit about the change that has taken place in the Federal court system? We all know what it was originally designed to do. It was mostly a civil court system. You had a Federal question. You had diversity jurisdiction. And some say once upon a time you had a fairly leisurely pace. What is the situation with the Federal court system today? And to what extent does this federalization play a part in it? Judge Merritt. Well, let me give you some examples. I think they represent the general trend that the Chief Justice mentioned in the statement I gave. In my own court, the Sixth Circuit Court of Appeals, I have been a member of that court for 22 years, and when I became a judge on the Sixth Circuit, we had from 230 to 250 direct criminal appeals or criminal cases a year, and now we have about a thousand. Most of those cases, a majority of those cases are drug-related cases. Of course, those cases are ones that are duplicate cases with the State Governments, and many of them are just regular run-of-the-mill drug cases that could easily be prosecuted in the---- Chairman Thompson. Possession cases? Judge Merritt. Distribution and possession cases, firearms cases, and they are---- Chairman Thompson. What kind of firearms cases? Is that mostly possession illegally? Judge Merritt. Felon in possession of firearms, things that are also State crimes. In our home town of Nashville, where we both served as U.S. Attorneys, now I am told about 60 percent of the prosecutions in Federal court are drug-related, drugs and firearms cases. Then the rest of them are usually---- Chairman Thompson. Do you know how many assistants they have in the Middle District? Judge Merritt. They have got about 20 now. When I was U.S. Attorney, I had four. Chairman Thompson. I was there right after you, I think, and we had five, I think, the early 1970's. Judge Merritt. But there has been a big increase in Detroit, for example, which is part of the Sixth Circuit, from the time I was U.S. Attorney. I think it has gone from about 25 to 150 or perhaps more now, and a corresponding increase in the size of the staff. And most of that has been the result not of prosecuting core crimes against the United States itself or against officials of the United States or some kind of crime that addresses itself directly to the United States as an entity. It is mainly because of the prosecution of duplicative State crimes. I am not arguing that there should be no Federal laws that are in the area where the States have plenary jurisdiction, but they should be much more limited than they are. Chairman Thompson. But isn't the basic problem that there is really no way, philosophically or practically, to increase the number of courts and the number of Federal judges to keep up with this? I mean, you have got to either start dealing with them faster, which, of course, the quality is going to go down---- Judge Merritt. Well, what has happened in our court I think is a good example. It has happened to other Federal courts. About half of the orally argued cases in our court are criminal cases. That used to be 15 percent. The reason is we have maintained the attitude that before you go to the penitentiary, you at least ought to get a opportunity to have a oral argument, have your lawyer---- Chairman Thompson. A disturbing presumption. Judge Merritt. Yes, a lot of courts of appeal--some courts of appeal have just forgotten about or done away with oral argument in many criminal cases. We still try to maintain oral argument in criminal cases, and that has eaten up our oral argument docket so that now we are having telephone oral arguments, for example, in the court of appeals in order to keep up with the criminal docket. Next week, two judges and I, a panel of three, will hear seven cases next Wednesday on the telephone in an effort to---- Chairman Thompson. How do you know if the lawyers are standing or not? [Laughter.] Judge Merritt. We know they are sitting. Chairman Thompson. I was not aware of that. Is that a recent--are other courts doing that, telephone oral arguments? I have never heard of that. Judge Merritt. There may be one or two, and there is more of this videoconferencing that is going on where the lawyers stay at home and sometimes the judges stay at home with a video monitor and you try to overcome the expense and the inefficiency of travel as a result of that. Chairman Thompson. Let me get in one more question before my time runs out here. General Meese, you referred to this, our tending to want to respond to the tragedies that we are experiencing. They come all too often. All of us have a natural response to want to do something, ask questions and so forth, and we in Congress are no different, and probably more so than most. We have seen the discussion, heard the discussion that has come about from the recent tragedy out in Colorado. People are searching for reasons. People are trying to come up with solutions and things of that nature. Some of them have to do with potential legislation. Some of them to do with cultural issues which present different kinds of constitutional questions and problems. Others have to do with preventive legislation. Another one has to do with punishment. Others have to do with gun control. From your experience and your observation, relate what we are talking about today, that is, the federalization of basically things that are already State criminal laws, preempting--or duplicating, I guess I should say, the State criminal justice system. What are your thoughts about what we should or should not do in response to that? Mr. Meese. Well, Mr. Chairman, I don't believe that there is any need whatsoever for any new Federal laws that would arise out of the tragic circumstances in Littleton, Colorado. Indeed, one of the persons who has done research on this has found that it was not a problem of inadequate laws. It was the fact that people broke laws. And they pointed out the fact that some 19 different laws were on the books that pertained to the violations that occurred as a part of that tragic circumstance out there. So it is a matter of enforcing the laws we have on the books, not trying to make a lot of new ones. And certainly the points you make, dealing with cultural problems, dealing with new preventive techniques, it seems to me that the Founders in the Constitution were quite right in saying the States should be the ones where they have the ability to experiment with different things, and if they don't work, then they can change them at the State level rather than having a sweeping generalized Federal law which would apply to all 50 States in trying to deal with very intricate moral and cultural matters which are best addressed at that level of government closest to the people. Chairman Thompson. It seems to me that there is a general proposition that we are searching for questions right now is a point in favor of federalism and different approaches and different venues to these problems to see what does work. Senator Durbin. OPENING STATEMENT OF SENATOR DURBIN Senator Durbin. Thank you, Mr. Chairman. General Meese and Judge Merritt, thank you for joining us. I am not going to rise to the occasion of the last question because I have different views than the Chairman on such things as whether States can adequately regulate the sale of guns over the Internet or whether the Brady laws should be extended to gun shows, all of which I think may have some bearing on what is happening, not only gun violence in Littleton, Colorado, but across the country. But I really want to focus on a much different question. I agree, incidentally, with the findings of this report and with the Chairman's conclusion that we should encourage all of our colleagues to read it closely because it really puts an amazing perspective on what the Congress views as its role in the results of our legislation. But I would like to really look at this issue from a different angle than the commission and, frankly, from the testimony here, focusing less on what goes into the system and more on what comes out of the system. And let me tell you exactly where I am headed. General McCaffrey, our drug czar, testified last year before the Senate Judiciary Committee, and I asked him point- blank whether the statistics that I had read were accurate, and they were as follows: African Americans comprise 12 percent of the population of America; they comprise 13 percent of people committing drug-related crimes; they comprise 33 percent of all arrests for drug crimes, 50 percent of all convictions for drug crimes, and 67 percent of all incarcerations for drug crimes in our country. I also note here that the sentencing under Federal law and Federal Sentencing Guidelines for drug-related crimes, as noted on page 30 of the report, is dramatically higher in the Federal courts than it is in the State courts. There was a survey done by The Tennessean newspaper back in 1995 which took a look at sentencing across the Federal courts of the Nation and came to the conclusion that African Americans were more likely to be sentenced to 10 percent longer sentences for Federal crimes than whites. Now, let me hasten to add that this was not a Tennessee or a Southern phenomenon. In fact, the opposite is true. The disparity was highest in the Western part of the United States in Federal courts. It was next in my area, the Midwest, 12 percent; the Northeast, 10 percent; and the South, 3 percent. So this is not a Southern Federal court phenomenon. It appears to be a national problem, much worse in the West and Midwest than in the South or the Northeast. The point I am getting to is this: If we are to create more drug crimes, as we have, if we are to create sentencing guidelines, and if the net result of that is to incarcerate more African Americans, disparately larger numbers of African Americans, and to sentence them to longer sentences in the Federal court system, what is coming out of this system is exceptionally perverse. And I would like your thoughts on that. It is my estimate, at least in 1995--and I am sure the figures have changed somewhat--that about 6 percent of the Federal judiciary were African American, and we find a system now that is unfortunately producing results that are prejudicing at least one group in terms of incarceration and sentencing. So as we federalize, as we impose more sentencing guidelines, are we going to exacerbate this problem, General Meese? Mr. Meese. Well, I would be interested in the source of the statistics because most of the surveys I have seen do not show that kind of a dichotomy on a racial basis in sentencing generally. Now, it may well be--and particularly in the Federal system--that the sentencing guidelines, it must be that there is some--if those statistics were correct, that there would be some unusual perversion of the sentencing guidelines. Perhaps Judge Merritt has had experience in this regard to be able to answer this question, but it seems hard for me because the sentencing guidelines were designed to regularize sentences without regard to external, non-relevant factors, and to concentrate on specific criteria relating to the crime rather than to the criminal, particularly the irrelevant characteristics that you mentioned. So I also would be interested in the source of the statistics in the sense that I don't know how they can find that 13 percent of--that African Americans compose 13 percent of those who commit drug crimes but 33 percent are arrested, since how do you know who is committing drug crimes other than by arrests. So the statistics intrinsically have some question as to their validity as to that factor. In terms of the convictions and the incarceration rate, you would have to look in much more detail as to the particular offenses charged and so on. In the Federal system, most of the drug crimes relate to the distribution of drugs, the transportation, illegal importation and that sort of thing, the more serious drug crimes. Often possession may be the actual charge, but that is not what the person has done. It is what they are able to prove in a particular instance. But obviously any racial basis, as I say, based on irrelevant characteristics should not be a factor in either arrests or convictions or punishment. And so it would be interesting to delve behind those statistics if they are, in fact, true. Senator Durbin. Thank you. Judge Merritt. Judge Merritt. Well, let me say about the sentencing guidelines--and this is, I am sure, a voice in the wilderness. I have said many times the worst thing that ever happened to the Federal courts was the sentencing guidelines. And the result of the sentencing guidelines has been sentences which are much harsher now than ever. And the drug war has been a part of that situation, and the theory of the sentencing guidelines no longer has anything to do with rehabilitation. It is altogether--the theory of it is deterrence, mainly, and to some extent vindictiveness or retribution. So the sentencing guidelines themselves are extremely harsh. The Federal judges have supposedly considerably reduced discretion in sentencing than previously. Now, on the question of disparate treatment of African Americans, I read the series in The Tennessean, because that is the newspaper that I read, and discussed the problem with some of the people over there, and in my view, it could be true but the statistical basis for it was somewhat flawed. For example, it didn't take into account the criminal history situation entirely of the people being sentenced. At the same time, however, I am not sure that it is wrong. It is just that you can't tell whether it is right or wrong. And they did a conscientious job, and it is worth raising the issue, certainly. But the sentencing guidelines themselves are a major problem for the Federal courts. One of the reasons they are such a problem for our court is the number of appeals has grown tremendously. Everybody appeals the sentence, and this is a major problem for us. Our resources are--we are struggling to keep up. One reason is the sentencing guidelines. Senator Durbin. I will make just two observations, Mr. Chairman, before ending my questioning, and that is, Congress is at fault here as well, and I would confess to be part of that problem as part of Congress. For example, the disparity between sentences for crack cocaine as opposed to pot or cocaine is going to have an impact more on certain groups in our society, namely, African Americans. The last point I will make is that I have a genuine concern about the integrity of our judicial system and the respect which we have to have for it if it is to succeed and if that respect is not--if we do not strive to make that respect universal, I am afraid that it will be very difficult for those who are charged with enforcing the law to do their job. Thank you, Mr. Chairman. Chairman Thompson. Thank you very much. Senator Voinovich. OPENING STATEMENT OF SENATOR VOINOVICH Senator Voinovich. Well, first of all, I would like to congratulate the Chairman for following up our hearings on federalism with this particular subject of federalizing crime. I have been concerned a long time about Federal preemption of State law and local law, and I am hoping that perhaps with some legislation here we can cause our staff to look at whether or not various laws that Congress is considering preempt State and local laws and perhaps have a presumption that says that they don't. But I hadn't thought about the federalization of crime until you raised it at this hearing, and it gets back to a pet peeve I have had for years, and that is that all the polls always show crime is an issue, and a dime will get you a dollar that most of the laws on the Federal books today are a result of those polls that said somebody has got to have something on their record to show they have cracked down on crime and they can go back and campaign on it or do a 30-second commercial. I think, Mr. Chairman, that these five recommendations of Judge Merritt are very good and that perhaps we ought to have these as guidelines before we pass any more Federal legislation in the area of crime, and that we should highlight that of all this legislation that is passed, very little is enforced. It is all form and no substance that has led to public cynicism and we ought to do more about that. And I think most people also, Mr. Chairman, look at dealing with crime and that their logic tells them it is a State and local matter. The other thing that it is a commentary on is the fact that today in our society, instead of really looking at the problem with the right perspective, we are all interested in the silver bullet. It's the easiest thing. That's the problem. We had the Littleton thing; let's pass a couple laws and everything is going to be fine, and then we go off and do something else, instead of taking the time to look at what the real problem is. I will give you an example of it. Two years ago, or 3 years ago, Professor John DiIulio over at Princeton was talking about the upcoming predator generation, that our demographics show that we are going to have a lot more younger people in this country, and as that goes up we are going to have some real problems in the year 2010, 2015. So I had called a juvenile crime summit in Ohio in 1997, and it was very interesting that many of the people who were proposing we need tougher laws on crimes and longer sentences and more boot camps and all the rest of it, that the real experts said that the real problem dealt with other things. And it reminded me initially of something that the man who ran our prison system in Ohio once said when we were talking about how to reduce the population in Ohio's prisons, and he said ``Head Start,'' that we have got to get people early on in their lives and make a difference. It is interesting. Professor DiIulio said the big problem today is that people are growing up in moral poverty, which he describes as ``the poverty of being without loving, capable, responsible adults who teach you right from wrong.'' And I think that this whole tendency to pass a law and assume that the problem is taken care of is a cop-out and that we need to be a lot more thoughtful in some of these areas where we think that we are going to be making a difference. Mr. Chairman, one of the things you are going to be hearing from me is that I am going to be promoting more activity on the Federal level in reordering priorities to deal with the prenatal-to-three area, which all of the experts say is probably the most important area in the development of a child, which we completely neglect. The point I am making is that we need to spend a lot more money early on making a difference in the lives of the people in our society instead of dealing with the problem later on. And in Ohio, in terms of the Federal crimes, Mr. Chairman, the Federal prosecutors usually tell the State guys, you handle it, we haven't got time for it, besides that you have got the jails and we haven't got the jails. I mean, there is a lot of that going on at the local level. I think probably the most positive thing from my observations over the years--and I would be interested in, General Meese, your observation--is the coordination in terms of enforcement between local and Federal officials. I experienced as mayor of Cleveland several instances where there was no coordination, and everybody was off doing their thing, DEA, FBI, Treasury, and local prosecutor, local police. If we really are interested in making a difference in terms of crime in this country, more emphasis ought to be placed on coordinating the activities of the various law enforcement officers so that they can work together to really make a difference. I would be interested in your comment on that. Mr. Meese. Well, thank you, Senator, and you are absolutely right; it is the coordination between the various law enforcement agencies at all levels of government. Your own experience in a sense parallels my own. We have both served at both the local, State, and now Federal Government in your case, and mine when I was Attorney General. One of the principal objectives during the time that I served in the Department of Justice was to advance that kind of coordination. We organized the Law Enforcement Coordinating Councils in each Federal district, bringing together local chiefs of police, sheriffs, and State officials of the State Department of Justice, along with our U.S. Attorneys and the various heads of the DEA, FBI, Marshals Service, and the other Federal law enforcement agencies. And this has gone a long way. In the drug field, for example, the Drug Enforcement and Organized Crime Task Forces, I think this is a very important aspect. In many cases, we don't need additional resources. We need the resources we have working together more effectively and also allocating the responsibility according to what they do best. And one of the things that the proliferation of Federal laws that duplicate State laws does, it destroys that kind of allocation of responsibility as well as hampers coordination if they are all fishing in the same ponds. Senator Voinovich. Mr. Chairman, do I have time? Chairman Thompson. Yes. Senator Voinovich. Does the ABA comment about legislation that is being proposed? Mr. Meese. I believe that the ABA may. The task force operated separately from the legislative advocacy branch of the ABA. I don't know whether they do or do not comment on specific pieces of legislation. But I know the task force would hope that when they do consider--and the ABA has a process whereby they take positions only after they have been adopted by the House of Delegates. But we certainly will urge on the House of Delegates, which meets only infrequently during the year, that our report on the federalization of crime be one of the criteria they use in determining the ABA position on specific legislation. Senator Voinovich. Well, I would suggest that they give it serious consideration. I think that if you had a task force that used criteria, perhaps what Judge Merritt suggested, and then you had some criteria in terms of when it was appropriate, and that they would make it a point that when some of this stuff is being considered here that they come in and say it is not needed, it is duplicative, it is not going to help things, that would go a long way to reduce some of these bills that are being introduced here because the people introducing them would know that there is going to be somebody that is going to comment about whether indeed they are really needed. Mr. Meese. I think that is an excellent suggestion, and, incidentally, the criteria that Judge Merritt has proposed is substantially included in the report itself, as well, as the basis on which Federal legislation is necessary. So I will certainly pass that on to the appropriate officials within the ABA. Chairman Thompson. What we have run up against is the marrying together between those who seem to always look for a Federal solution, Senator, along with those who want to be tough on crime, and they get together and form a heavy majority. And those who are out there saying, hey, wait a minute, there is absolutely no indication that it is going to do any good, every State in the Union already prohibits this activity. I think last time that came up on the guns-in-school legislation, we got 21 votes, something like that, for that proposition. So I am glad you are here now, so maybe that is 22. Senator Voinovich. Mr. Chairman, I would also like to say one other thing, that we need to do a little better job talking about the things that work. For example, our State I think is the only State in the country where the number of people in our juvenile facilities has been reduced because several years ago we went to a program called Reclaim Ohio, where we are allowing our judiciary, the juvenile judges on the local level, to find alternative places for these youngsters rather than sentencing them to State facilities. And that took a little money because in the old days, their only alternative was to send them to the State because the State will pay for it. Now what we say to them is if you keep them in the local area, we will give you $75 a day. In other words, they are looking at these youngsters and saying they have mental problems, they have drug problems, but there is a different approach to dealing with this. It is not crack down, throw them in jail, and they are going to be better. Our statistics show that boot camps, for example, don't work. We have found that boot camps for juveniles really do not help but hurt. I just think that more publicity, more best practices being shared about what really does make a difference needs to be emphasized rather than the silver bullet that so many people would like to advertise and then, as I say, go off and do something else. Chairman Thompson. Senator, you are pointing out something that I think is very important, and while I have still got you here, I would like to address just maybe one further question to you, again, if you please. That is, in response, again, to the current situation that we have, one of the things that we are considering is the Violent Repeat Juvenile Offenders Act. I don't know if you have had a chance to look at that. And since this juvenile crime legislation has been pending--I was on the Judiciary Committee until recently, and my concern has been just what you were talking about. Everybody has got their own idea as to what is a great program. And we sit up here in Washington and decide what makes sense to us. We find out later that either it doesn't do any good, maybe it does a little good, maybe it does harm, but we decide. And then we encourage the States to do what we decide that they ought to do in response to this problem. My feeling has always been that as far as a Federal role is concerned, one of the things that the Federal Government does better than anyone else, I think, is probably research and development and evaluation. And perhaps maybe we ought to acknowledge our ignorance in these areas and spend a little more time just doing basic evaluation in Washington, making that information available throughout the States, be a clearinghouse for information, programs that are being tried all across the country, what works, what doesn't work, and then let States make their own determination as to what they want to do. I would like your thoughts on this bill, General Meese. I think the staff indicated that I was going to ask you a question about it. It is complicated. It has many provisions in it, some of which I think are much better than they were. I think there is still some expansion of--we are still into this juvenile gang business. We get the camel's nose under the tent--juvenile gangs, and then people who help juvenile gangs, then people who help people who help juvenile gangs, and we keep going in that direction. And then there are a lot of grants, $450 million for the juvenile accountability block grant. That is for buildings and prosecutors and things like that, as I understand it; $75 million for juvenile criminal history upgrades; $200 million for challenge grants, that is more in the preventive area, as I understand it; $200 million for prevention grants; $40 million for National Institute of Juvenile Crime Control and Prevention, of which $20 million would go to evaluation and research; $20 million for gang programs; $20 million for demonstration programs; and $15 million for mentoring programs. With regard to the juvenile accountability block grant, to be eligible for the grants, States must make assurances it will establish, first, a system of graduated sanctions because States don't have enough sense to realize that you ought to have graduated sanctions. We need to tell them that. We will give them the money if they will follow our wisdom because we have got those answers up here. Second, drug testing for juvenile offenders, I think we could all agree that is a good thing in general. Third, a system to recognize the rights and needs of the victims of juvenile crime. It is a good thing, but three things, three priorities of a million priorities that you could choose from. What about all of this? I know you don't have time to address all the details. Is this a right approach? Is it 50 percent right? Should we start all over again in the way we are looking at the problem here? Mr. Meese. Well, Senator, Mr. Chairman, my own view is that whether this bill passes or doesn't pass will have zero effect on violent crime or juvenile crime in the United States. It is the local officials, it is the local resources that are going to have the impact on this. There are some valuable things in the bill, namely, it eliminates a lot of programs that the Federal Government is presently engaged in which have been found to be useless or redundant or unnecessary. I think, quite frankly, we have plenty of money now going out of the Federal Government to the States in the juvenile field. I would get all of that money together, divide it by population and on a population or some other similar fair basis give it to the States in block grants and let them decide how best to use it. Some of the provisions in the bill are pernicious in that it extends the federalization of crime, particularly those that relate to the firearms provision and the criminal gang provision, makes substantive offenses on the basis of Federal law, which is already covered or can be covered by the States if they so desire and see it is important. So, as I say, if this bill did not pass, it would not have any detrimental effect on the enforcement of criminal law in the States. If it does pass, it is not going to have any real beneficial effect. I would think that, again, the best thing that the Federal Government could do is take the money already going to the States for a whole variety of these programs, give it to them in block grants---- Chairman Thompson. Practically every department of government has juvenile crime prevention money. The Department of Agriculture, we found out, has some. Mr. Meese. My understanding is that there are some 300 different programs scattered among the various agencies of the Federal Government. Chairman Thompson. Judge Merritt, with regard to the judiciary, I noticed in the ABA report they said from 1980 to 1994 the number of Federal prosecutors increased 125 percent, and the number of Federal judges, both district and appellate, increased 17 percent. So you are being outgunned there in terms of---- Judge Merritt. Well, we just have to hire staff. The problem in the Federal courts is not only the rise in cases, but something has to give when that occurs, and what concerns me is that the deliberative process itself may be undermined. The Supreme Court can limit its jurisdiction to a certain number of cases a year. The Federal district courts and courts of appeal can't do so. So shortcuts then become necessary, and any shortcut reduces the amount of time a judge has for deliberation and reflection. I might say on the subject, there is something to be said for Federal action in a symbolic sense; that is, the political arm of the government, the Congress of the United States, sees a problem and they want to act in order to express the will of their constituents. There is, it seems to me, better and worse ways to do that. The worst way to do it is to permanently federalize the criminal area. The least worst way may be through appropriations of some kind because that is an annual year-to- year process, not permanent, and it may waste some money, but it doesn't undermine the fabric of a federalist society. So when symbolic action becomes necessary through the political process, for example, in response to Littleton and other similar events, there is something to be said for symbolic action, but little to be said for federalizing the matter as a matter of crime, and much to be said for seeing if there is some experimental program that may require some appropriations which can be easily ended from year to year. Chairman Thompson. And perhaps more in terms of evaluation of programs that are---- Judge Merritt. And research. I think there are a lot of things the Federal Government can do to assist State and local law enforcement. For example, electronic surveillance is assisting State and local governments where necessary in serious crimes. In that respect that is one example. There is a lot of aid that can be given which doesn't entail or require the creating of Federal crime or bringing some case in Federal court by a Federal prosecutor. Chairman Thompson. That is an extremely helpful and insightful analysis, I think. Let me ask just two more things. On your five criteria that we are talking about, you said something that was interesting to me. With regard to the interstate-international aspect of it, you said something that is difficult, almost impossible to do otherwise. It is an interstate--it seems to me that the state of the law is--well, not the law but the state of Congress is that if we can remotely attach anything to interstate commerce, it is not a question of whether it is wise or not, we just go ahead, if we can remotely--or even allege, just allege, we don't even have to show that there is some connection. I take it that then we go ahead and pass laws in that area and say, well, it affects interstate commerce. And, of course, I guess in one sense or another, everything affects interstate commerce. And up until fairly recently, anyway, the Supreme Court has kind of gone in that direction. I take it that you feel that there not only should be some nexus but there should be some very strong nexus to interstate commerce before we federalize in that area. Judge Merritt. Yes, and one of the reasons is because the way the prosecutorial system works inside the Department of Justice is very decentralized; that is, the U.S. Attorneys pretty much have discretion to bring what cases they want to. There are few areas where they are limited and have to get the permission of the Criminal Division of the Department of Justice, for example, in areas like local corruption. But in the main, in the great broad sweep of these duplicative crimes, it is left to the discretion of the local prosecutor. The local prosecutor can bring, as they frequently do and as we see every day, a case that is no different from the case that would be brought in a local police court of the local jurisdiction. It depends on prosecutorial discretion and selection, and there is not much control of that through the Department of Justice, and there is, in fact, a tension between the local--as you may remember, a tension between the department oftentimes and the local prosecutor, a ``don't tread on me'' sort of attitude. And a lot of cases are brought as a result of that. Chairman Thompson. One final thing. You mentioned in your statement that much of your docket now is drug cases, illegal possession of firearms cases, and that it was having minimal effect on the distribution of drugs and illegal firearms. You said most of your cases, or a good many of them, anyway, are possession cases. Is one of the places we are missing the boat as far as drugs and firearms are concerned is that we are not drawing a proper distinction between possession on the one hand and perhaps interstate transportation on the other hand, that perhaps if it is an interstate transportation case, those are traditionally Federal kinds of cases and activities? But on the other hand, if it is mere possession of drugs or firearms that are otherwise prohibited by local law, that that is not something that needs to be federalized? Judge Merritt. Let me give you an example. It depends on what you mean by interstate transportation or how much interstate commerce you want to say is a prerequisite. In Memphis, for example--and this is true in a lot of cities that are near the border of the State. In Memphis, there are a lot of cases where the local police officer will make a case, he will stop or she will stop an automobile that is coming across from Arkansas or Mississippi or somewhere, and the law is that you can stop for any reason and then search for drugs, and the reason for the stop is somewhat of a pretext. So the police officer stops an automobile, they find some drugs, and the case is then brought in the Federal court. It may be 10 grams of crack cocaine or cocaine base or whatever. But the car came across the State line---- Chairman Thompson. So what you are saying is that even in some so-called interstate cases, it should not be federalized? Judge Merritt. Yes. I mean, it is a big country now. I think that--and a lot of State lines--we don't need to prosecute all those cases in the Federal court. I think the Federal Government, the Federal law enforcement establishment would be much--and the Congress--would be much better off if just as a matter of priority it looked at the international criminal area, which I think is affecting the country now substantially, because this is an area that State Governments can't really deal with. The National Government has to deal with that, and crimes in that respect are crimes against the Nation and fall clearly within our jurisdiction over foreign policy. So I think that there should be a de-emphasis on these local domestic situations and an emphasis on---- Chairman Thompson. The original purposes of the Federal court system. Judge Merritt. Right. Chairman Thompson. At a time when we have increasing problems--you mentioned the international aspect of drugs. Practically all illegal drugs come in from a foreign country. Judge Merritt. Well, that is true, and then we have gangs. I mean, I have heard a lot and read in the paper of gangs from different countries--the Russian Mafia is coming into the United States. Well, it is hard for State and local people to deal with that kind of problem, and Nigeria, other places. Chairman Thompson. The point being that we have got--I mentioned the espionage case. We have got serious Federal, national problems that require serious Federal resources. And, we are talking about animal hijacking and having FBI agents go out to country schools, presumably to check on kids. We are going the wrong direction there. I have kept you much too long. I appreciate it. General Meese, do you have any parting comments? Mr. Meese. Just that I would strongly support the Chairman's comments on research and evaluation. One of the things is that there is very little evaluation of most of these programs, and rather than end programs that are not effective, we add new programs without looking at those that are already on the books. So I support your comments on research and evaluation, which needs to be done on a national scale, and which outfits like the National Institute of Justice, Bureau of Justice Statistics, and others can be very effective as a nationwide support for local law enforcement. Chairman Thompson. Thank you very much, gentlemen. That is extremely helpful. I would like to ask our second and final panel to come forward, please. Our first witness will be the Hon. John Dorso, the Majority Leader of the North Dakota House of Representatives, who is testifying on behalf of the National Conference of State Legislatures. He will be followed by Gerald Lefcourt, immediate past president and legislative committee chair of National Association of Criminal Defense Lawyers. Our final witness today will be Professor John Baker, Jr., the Dale E. Bennett Professor of Law, Louisiana State University Law School. Gentlemen, welcome. Representative Dorso, would you like to begin, please? TESTIMONY OF HON. JOHN M. DORSO,\1\ MAJORITY LEADER, NORTH DAKOTA HOUSE OF REPRESENTATIVES, ON BEHALF OF THE NATIONAL CONFERENCE OF STATE LEGISLATURES Mr. Dorso. Thank you. Good morning, Mr. Chairman. As you said, my name is John Dorso. I am the Majority Leader of the North Dakota House of Representatives, and I also serve as chairman of the Law and Justice Committee of the National Conference of State Legislatures. Today I am testifying on behalf of NCSL and, I believe, all State legislators. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Dorso appears in the Appendix on page 251. --------------------------------------------------------------------------- First of all, let me thank you for your kind reception of the present president of NCSL, Speaker Dan Blue, yesterday. I understand that went very well. We appreciate that. I want to thank you for holding these hearings on the issues of federalism and preemption because I think that they are very serious issues. As State legislators, we face what you do every time we go into session. It seems that we in North Dakota are dealing with some more mandates or preemptions that come down from Congress, and it is very troublesome to us that we have to deal with those issues because NCSL's touchstone and my touchstone is, of course, the Tenth Amendment and what is supposed to be reserved to the States. And, of course, the police power is one of those that we believe is one of our prerogatives. Today, as I was listening here, so much of what was said is what I was going to say that I am going to skip my prepared remarks. As a legislator for 15 years, I guess I don't like to listen to the same things said twice, and I am sure that your Committee has the same opinion. And I certainly don't like to have people read to me, so I am going to skip that. Chairman Thompson. I am used to it. Mr. Dorso. You are used to it? Chairman Thompson. In retribution, I read to other people. [Laughter.] Mr. Dorso. Well, I'll try not to. I think some things have been said today. I totally agree with Ed Meese and the judge. North Dakota, being a small State, I have the ability to visit with our Federal judges. Pat Conmy, who sits in Bismarck, was a former legislator. Rodney Webb, who sits in Fargo, was active in party politics before becoming a judge. And the Federal prosecutor, U.S. Attorney John Schneider, was the minority leader before becoming the U.S. Attorney. So I have a close personal relationship with most of those folks, and I have an opportunity to visit with them about the federalization of criminal issues. And much of what is said today is the same thing they are telling me from their perspective, Mr. Chairman. The problems that were pointed out here I think are real. There is confusion as to jurisdiction, and that happens a lot, and especially in North Dakota, because we may not have a unique circumstance, but one that Western States suffer, and that is the Indian reservations and the Native American problem, and who has jurisdiction and the resources to deal with those problems. As an example of that, I will give you the methamphetamine problem. That is starting to centralize itself on the Indian reservations because those that perpetrate that crime find it is easier to do it there than in other parts of our State because of the confusion over jurisdiction, whether you are a member of the tribe or whether you are not a member of the tribe, and the jurisdictional problems. And I think there are a lot of resources being wasted, and I think the judges and the U.S. Attorney would agree with that statement. Many times we are chasing the same thing to get to a result, and a lot of resources are wasted where really the State could have done it just fine on its own, and the Federal Government could have been taking care of some other cases and what I believe is your responsibility, and those resources would be better spent on those types of cases. Now, you mentioned the ABA report, and I have had an opportunity to read that, and certainly I agree with the statistics and the conclusions. One of the things that I looked at in that report and I said, really, why does this happen? I mean, what is the root cause of this happening? And I think you have identified that, Mr. Chairman, as I think a lot of it is politics--and both of us--obviously, you are a U.S. Senator, but I have served in the North Dakota House of Representatives, see it. A lot of it is populist party politics. And it is too bad, but that is real. Any legislative session I am in, there will either be criminal law and/or even civil law that is introduced by special interest groups that seem to come as a reaction to events that have happened--we only meet every 2 years, but in the interim-- and then it is very difficult sometimes to say no to passing a new law because it looks good, it sounds logical, but really it should be left, in your case, to us as the States and, in our case, it should be left to the local political subdivisions. And that is difficult to do. I understand that. But it is something that I think we have to be very careful of, and I think sometimes in Congress that hasn't happened. So I think there are a number of reasons why it has happened. One is the populist politics. The other one is the bureaucracy that was mentioned earlier. We all know bureaucracy in State Governments, just like bureaucracy in the Federal Government, they will feather their nest, they will grow, unless somebody reins them in. And that I believe is our job as a member of Congress or as a legislator, to rein in the size of the bureaucracy and its tendency to overreach its original mission. Then I think there is another thing here, and that is that you pass it because you can. And that maybe sounds a little bit trite, but, that is a fact. You can, just as sometimes we can. And unless we put some type of restraints upon ourselves, it will continue to happen. I bring up the context of federalism in general, not just in criminal issues. Unless there is, as was discussed here earlier by the earlier panelists, some way for you folks to draw a line in the sand to say that you are not going beyond that, which means outside review by CBO or whoever--I have no idea whhere would be the most appropriate place to put that responsibility--to say to you this is where we have drawn the line in the sand. Now, if you choose to go beyond that, that is a decision you can make, but, still, you have gone beyond the line in the sand. And I think that is important. We have tried to do that in the North Dakota Legislature by putting certain procedures into our rules so that when we start trodding on the local political subdivisions, they come in and they can raise a lot of hell with us. And then that tells us we should back off. And I think that there is something that needs to be done in that regard, and I heard that it was discussed earlier. I think that there are a number of areas that the Federal Government needs to help us in, and I heard that discussed and I agree with that. I also do not subscribe to the theory that all Federal criminal law is bad, because I certainly think that when it comes to organized crime and dealing with the Cali cartel on drugs and stuff, we are not capable of dealing with those types of things at the State level. I think certainly we can be cooperative in those efforts with our local law enforcement officials and State law enforcement officials, but in general, when it comes to international and organized crime to the level of interstate trafficking, etc., we are not capable of dealing with that. I think that the Federal Government has a legitimate role. But I think there needs to be that line drawn, and it needs to be clear, and it also needs to be clear as to what is our responsibility at the State level when we are dealing with those issues. So, with that, Mr. Chairman, I would rather spend some time answering questions later, but those are my feelings on this issue, and I certainly appreciate these hearings, and I hope that something can come of it. Chairman Thompson. Thank you very much. I appreciate your being here. It has been a long time, Mr. Lefcourt. Good to have you here. TESTIMONY OF GERALD B. LEFCOURT,\1\ IMMEDIATE PAST PRESIDENT AND CHAIR, LEGISLATIVE COMMITTEE, NATIONAL ASSOCIATION OF CRIMINAL DEFENSE LAWYERS Mr. Lefcourt. It has been. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Lefcourt appears in the Appendix on page 260. --------------------------------------------------------------------------- Chairman Thompson. I used to pay good money to hear Mr. Lefcourt lecture and learn about the law. Now I don't have to pay, but I am still learning. Mr. Lefcourt. I remember those days, and I remember your counselorship on the Watergate Committee, and I really remember it with a lot of fondness and respect. Chairman Thompson. Well, I appreciate that very much. Mr. Lefcourt. Mr. Chairman, I, too, am not going to read to you, but we all have our favorite sort of sound-bite stories, and really this hearing could be sound bite or sound policy, a look at the overfederalization of criminal law. One of my favorites, it is a scary one, and I think you will appreciate that knowing your background in the criminal law. After the Atlanta Olympic bombings, needless to say, a shocking, frightening, terrifying event, the administration, before anybody knew what really happened, proposed the most sweeping undertaking of wiretapping that there had ever been in this Nation. As you know, our wiretap laws, both State and Federal, require applications to courts. Those courts uniformly grant them. I think there has been only three in the last 15 years that have been turned down. But, nevertheless, without knowing the cause, the reason, or what have you, in order to act as if something is being done, sweeping wiretap legislation was proposed. And it took Herculean efforts by literally dozens of groups across a broad political spectrum, from the National Rifle Association to the National Association of Criminal Defense Lawyers and the American Civil Liberties Union, and many groups all over the lot to try to derail that legislation. And this is just the kind of thing that scares everybody, and I think what every speaker here today and yesterday has been talking about: An overreaction, the feeling that something has to be done, some legislation has to be passed, and to hell with the consequences. And this is the real concern. We have submitted, Mr. Chairman, an article by three of us, and this is kind of an unusual and absolutely very creative alliance that was formed 2 years ago by myself as president of the National Association of Criminal Defense Lawyers; William Murphy, the president of the National Association of District Attorneys; and Ron Goldstock, the then-Chair of the ABA Criminal Justice Section, which sponsored the Meese report. We began to think about these issues and the principal concerns that we had with this type of reaction to highly publicized events, and you could think of many in your own mind during the last Presidential election. And it doesn't matter what party, and we are not looking for a particular result. We are looking for a process. During the last election, one of the candidates said the President of the United States should be behind victims. Who could argue with such a proposition? And the other candidate said, well, I am going to one up you. I am going to propose a constitutional amendment, the victims rights amendment, and I have read what you, Your Honor, Mr. Chairman, have written on the subject and couldn't agree with you more. And this is the product of the political fray. But, lo and behold, we are becoming dangerously close to actually passing a constitutional amendment where, clearly, statutes should be tried first, as everyone says, and are being tried and tried through the States, and working quite well. We have on our docket a constitutional amendment that could alter our entire adversarial system in the name of sound bites, with all due respect, because it doesn't matter which political party proposed it. The fact of the matter is such sweeping proposals could have disastrous effects on our constitutional system. And so the three of us, thinking about things that we agree on, have written a series of articles. The most recent one is my testimony today, which, as I speak, appears in the National Association of District Attorneys magazine, the Defense Lawyers magazine, and the ABA Criminal Justice Section magazine. What it does is, putting all of our talk over the last few days into a concrete piece of legislation which with standing rules from both Houses could result in a mechanism that could at least some way protect us from sweeping proposals which have very little actual good effect and potential disastrous effect, like the ones we have been speaking about. This concrete proposal draws on a statute which is already in effect, and that statute requires the Judicial Branch and Executive Branch of government to come in with a prison impact statement with their proposals of new legislation. You didn't hear me say ``congressional'' proposals. It is only the Judicial Branch and Executive Branch. Well, this statute, 18 U.S.C. 1047, could easily be expanded--and that is our proposal--to be a two-fold statute, to have two inquiries: A Federal assessment and it actually picks up on what Judge Merritt was talking about in the five criteria because those five criteria come from the long-range plan of the Judicial Conference. His five criteria are that five criteria, and we adopt it because it is a reasonable look at what the Feds, so to speak, should be involved in. And so it has a two-part component, this statute: A Federal assessment using that five criteria, and then a cost/benefit analysis, using agencies like the Attorney General, the General Accounting Office, but also drawing on States' attorney generals and local, and to see how this proposed legislation, whatever it be, might affect the prosecutorial, judicial, defense functions of State and local governments. You talk about the juvenile legislation. I guess Attorney General Meese did not know, but the American Bar Association has taken a position against S. 254, as it did against S. 10, which was the predecessor last session. And that is exactly the type of legislation that would benefit by the type of study the statute that we propose in that article would undergo. And one would take a look at it in terms of the Federal assessment criteria and also the cost/benefit analysis. If you look at the Federal assessment criteria of the juvenile justice legislation, for example, I mean, the notion that you could have children in the United States district court whose feet can't reach the floor from the chair they are sitting on being brought to trial as they would under that Federal legislation at the unreviewable discretion of an Assistant U.S. Attorney--the judge would have no role--and that that child could then be housed, if you will, with adults where we know from statistics that they are 7.7 times more likely to commit suicide when housed with adults, and that we have this whole Federal bureaucracy involving juvenile justice. I think if you looked at that statute, using the Federal assessment criteria suggested by the Judicial Conference and mentioned by Judge Merritt here, and you looked at the cost/ benefit analysis of that statute, and there was some real study that the statute that we propose envisions, I don't think that there would be many people in Congress that would have a problem on how to deal with it. But now, when any sound bite gets into a piece of legislation and a filing and nobody knows and they are afraid to say no because they don't really want to look soft or they don't want to take the wrong appropriate political position, we end up with legislation that nobody wants. I think that this issue--and I am so happy that you have decided to have hearings on it--has become so important that it has united--look at the segments of our system that are united. Whether you are talking about the Chief Justice of the United States, the American Bar Association, Attorney General Meese, State legislatures, criminal defense lawyers, State DAs-- everybody knows that our sort of predilection for sound bites and spinning has grown just totally out of control. And unless we adopt a statute with teeth that applies to Congress, the judiciary, the executive, and instead of sound bite has sound policy, we are really going down a disastrous road. So that is our position, and I hope that out of these hearings comes something concrete, a statute that people could get behind. We are certainly not going to be able to stop people from talking, and sound bites and press conferences will continue. But at least we know that they will go into a process, and, again, it is the process that is important, not a particular result. Thank you very much. Chairman Thompson. Thank you very much. Professor Baker. TESTIMONY OF JOHN S. BAKER, JR.,\1\ DR. DALE E. BENNETT PROFESSOR OF LAW, LOUISIANA STATE UNIVERSITY LAW CENTER Mr. Baker. Thank you, Mr. Chairman, for inviting me to testify. As an academic, I feel some burden to explain that I have not spent all my time in academia. I do write and teach in the area of constitutional and criminal law, but I was an assistant district attorney in New Orleans where I tried many felony cases. I was a consultant to the Justice Department under Mr. Meese, where I worked with the Office of Juvenile Justice. I was a consultant to the Senate Judiciary Committee at the time of the proposed Federal Criminal Code back in the early 1980's, which would have been a disaster had it been enacted. I have argued cases in the Federal courts, including the Supreme Court. Some of this was prison litigation. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Baker appears in the Appendix on page 266. --------------------------------------------------------------------------- I served on the ABA task force with Mr. Meese. Obviously, my views expressed today do not necessarily reflect those of the ABA nor the school at which I teach. Mr. Meese mentioned that the Task Force included diverse views. In all fairness, it was, if anything, stacked towards the prosecution. Out of the 17 members on that Task Force, 11 were present or former prosecutors, State and Federal. So this was not a defense-oriented task force at all. Chairman Thompson. Well, everybody always admits to having been a former prosecutor. Probably if you look close enough, they were also defense lawyers at one time. Mr. Baker. There were actually very few defense lawyers in that group--your friend, Mr. Neal, but there were not that many others. It was, if anything, a prosecution-oriented group. Certainly Mr. Meese fits that description. One of the things that I learned in my short time working in the Congress was that the protection that the Founders intended in structuring Congress may work very well when it comes to non-criminal legislation, but the description of the Federalist about how the structure of Congress protects our liberty does not work well when it comes to criminal legislation. We have no need for new substantive criminal law in this country, either at the State or the Federal level--except possibly in the areas of electronic commerce and international relations, etc. This knee-jerk reaction, to pass new criminal laws, is not only a problem in Congress; it is a problem in the States. But there is a difference between the two. At the State level, there are certain protections that actually limit the damage that State legislatures can do. One of the things that I want to point out is that when Congress pass as criminal legislation, it is not just that it is worthless. It is dangerous. It is much worse than worthless. Let me give you just three general areas. It is, first of all, a threat to the innocent, which I will elaborate on. Two, it is a threat to democracy and the whole governing structure of this country. Third, it gets the Congress into moral, cultural disputes which it should know to stay away from. First of all, on the ineffective part, we all know at the prosecutorial and defense level what is driving federalization at the local level. It has to do with longer sentences, as has already by other witnesses. In most States, in drug cases, the Federal sentences are much longer, and, therefore, law enforcement has an incentive to push at least some of the drug cases into Federal court. In the State I come from, Louisiana, the State sentences are still much longer than the Federal sentences; so law enforcement does not have that same incentive. In terms of effectiveness, it is not sensible to push cases through the Federal system and it is not simply because they can't handle the case load. From a cost point of view, it makes no sense. You may have heard about Project Exile in Richmond, Virginia. There, the Justice Department, with the cooperation of the local DA, who probably should be unseated for pushing so many cases into the Federal system, wants virtually every gun case prosecuted in to the Federal system. The Federal district judges there have written to the Chief Justice complaining that their court has been reduced to a local police court. But, more importantly, they have pointed out that the cost of trying a Federal gun case is three times the cost that it would be in State court. Simply from an effectiveness point of view, cost consideration would dictate that you spend the money on the State rather than pushing the cases into Federal court. Chairman Thompson. That is being touted as a national success, and the logical extension of that is that you do it everywhere, which means a national police force. Mr. Baker. Right, exactly. I have written about that, and I want to point out that their claim is misleading. First of all, they are citing statistics on dramatic drops, but those numbers do not survive scrutiny. First of all, violent crime stats nationwide are down. They don't mention that. Second, New Orleans just experienced a 31 percent drop in murder rates, without the Project Exile program. New Orleans adopted New York's community policing, which seems to be responsible for its dramatic drop in crime. And that has nothing to do with the Federal Government. Moreover, we recently had in our State legislature a visit from Mr. Heston, who was promoting this Project Exile. We adopted a Project Exile, but with no involvement of the Federal Government. The main feature of Project Exile is sentencing. If you want to implement Project Exile, all you have to do is have your legislature raise the sentencing possibilities for particular crimes that you are concerned about. Local DA's are perfectly competent to handle these cases, and if they aren't, you need to unseat them and get a different DA. That is what the democratic process calls for. The biggest problem--which you as a former U.S. Attorney know--is that U.S. Attorneys are not politically accountable. If you don't like what your local DA is doing, you can have an impact on his or her policies. I went in with a local DA who campaigned against certain policies. He got into office, and the people said they wanted those policies continued. He did a 180-degree turn. He had no choice if he wanted to be re- elected. On the issue of innocence, which is really critical and on which no one else today has focused, it seems to me there is a fundamental difference between substantive criminal law at the State level and at the national level. At the State level, criminal law is essentially based on the common law. Even though we have the model penal code and even though we have revised the common law, we are still dealing with the basic crimes of murder, rape, robbery, burglary, theft, etc. This is extremely important because these cases are ultimately tried before a jury and a jury can recognize a murder, rape, robbery, etc. The problem in Federal criminal law is the great uncertainty in many of the statutes. The Supreme Court this term has decided two carjacking cases involving uncertainties in the language that Congress had used in drafting this statute. The uncertainty of Federal statutes is compounded by what the Justice Department does, as indicated by Judge Merritt, and by what the Federal courts have been doing with statutory interpretation. Federal crimes have historically been tied to jurisdictional limits, which complicate a statute, for example, the interstate transportation element of many crimes. Interpretation often distorts the language of the statute. You don't have that problem at the State level. When you get into a Federal criminal trial, the statutory issues can become extremely complex. It is difficult for the jury to understand, in many cases, what constitutes guilt or innocence because the parties involved, the lawyers--prosecution, defense--and even the judge can't agree on what is the essential core of the offense. While we know what a murder is, who knows what a RICO is? A jury can't recognize that kind of crime. Ultimately, many of these juries are making judgments based on the indications given to them by the court and on whether they view the defendants as ``bad actors'' or not. This is where the Justice Department comes in. The Justice Department, since the beginning of the century, has promoted statute after statute that is vaguely and broadly defined, with the attitude of ``just trust us,'' we will only use it in appropriate cases. But the history has demonstrated that they have used it well beyond the original arguments that were used to justify particular statutes. When it comes to a question of court interpretation, the problem is that the Federal courts have gotten way far away from the old rule of strict construction. They call it the rule of levity, but they have gone well beyond it. And, again, in one of the two carjacking cases, Justice Scalia in dissent was complaining that the majority completely ignored the notion of narrowly construing the statute as they ought to have done. Ultimately, creating Federal statutes for crimes that should properly be brought at the State level results in bringing and increasing the police power of the Federal Government. As the Lopez case said, there is no general police power in the Federal Government. The Congress has legislated well beyond any of its powers under the Constitution. There is no clear connection between the Commerce Clause and many of these criminal statutes. What the Congress is getting itself into with the police power are moral questions because the police power is used to shape the morality of a community. If you want to live in Las Vegas, where prostitution is legal, gambling is legal, fine, move there. But if you want to live in a more conservative State where prostitution and gambling are illegal, you can go to that State. Those are political, democratic, moral issues that local majorities ultimately decide on. When you take the police power and move it to the national level, what you have guaranteed is that you will generate more political divisiveness over crime at the national level. For instance, we know that supporters of abortion rights got the Congress to pass the FACA statute, the Freedom of Access to Clinics Act. We also know over the last couple of years that there has been the attempt to get a criminal statute on partial-birth abortion. Will the Federal Government's policy on criminal law as regards to abortion affect every congressional and Presidential race? Will it turn on who is in the Executive Branch to decide what is going to be the policy of the Justice Department in using its criminal powers in the area of abortion? Or shouldn't this be a matter that is left to the States? Ultimately, in the early 1980's, that bill that I mentioned, the proposed Federal Criminal Code, which was cosponsored by Senators Strom Thurmond and Edward Kennedy, went down to defeat for totally extraneous reasons--that is, it was a strange alliance between the Moral Majority and the ACLU that ultimately killed the bill. Unfortunately, when the bill was being considered, a bill of about 500 pages, most of the debate occurred over procedural matters. But of all the 500 pages, most of it concerned substantive criminal law. When I testified on that bill in a House committee and I asked about certain provisions in theft and other areas, the response from the staff was, well, we really don't know what those statutes do because the person who drafted those statutes has left. Some of the things that would have been criminalized in that bill were amazing. The House bill would have turned a normal accident into a murder if it resulted in death. It would have made corporate executives in this country guilty of murder for accidental deaths in some of their businesses. Sexual conduct between Members of Congress or the Executive Branch and staff members would have been made a felony. The consequences of many provisions in that bill were little understood. Fortunately, that bill died. Unfortunately, many parts of that bill were passed in the intervening years piece by piece. That is how we have gotten to the point where the Federal police power is so extensive and dangerous, even through prosecutors don't use all the powers of Federal criminal law. The fact is we are not just talking about courts and prosecutors. We are talking about investigation. We are talking about the fact that there are people on the payroll who have to justify what they are doing. There are between 100 and 200 Federal police agencies in this country that have the power to investigate. Whether or not their cases ever result in a prosecution, they can generate grand jury investigations that cause people to have to endure investigation for several years at a cost of several hundred thousand dollars in attorney's fees, only to find out that there really was no case after all. Although there are abuses at the State level, that kind of abuse simply can't happen in State cases because there are other checks. You could never spend the same kind of money in defending typical State cases. Thank you for listening to my statement. Chairman Thompson. Well, thank you very much. It is hard to know where to start. I could talk for a long time about all these issues. I am really amazed, as I think about what Mr. Lefcourt said, the confluence of opinions and philosophies and so forth. Everybody who deals with this, whether it be people that have to do with State prosecution, the defense, people concerned about civil liberties, people concerned about the concentration of too much power in the Federal Government, all agree, seem to agree on something that is totally losing in terms of the battle. It really, I think, gives hope that maybe we can do something about it. We had a hearing yesterday on federalism with regard to the civil side of the ledger. We have got a preemption bill that is, I think, in many respects very much comparable to what you are talking about, Mr. Lefcourt. It requires the Congress to, first of all, acknowledge what it is doing. If it is going to preempt in a civil situation, then it has to then state why. It doesn't go into quite as much detail as probably it should. Then it does an assessment at the end of the year as to the cumulative effect of all of these preemptions and so forth. But it is even more important in the criminal area because what you have in the criminal area that you don't have in the civil area is what you have in the criminal area in general. I mean, it is coercive power of government which makes it much more significant. Professor Baker, you point that out. Only 5 percent of the prosecutions are Federal. Many of these laws that we are passing are not being used. They are strictly window dressing out there for somebody to pick up--they pick and choose. But your point is even though that is the case, what is happening has detrimental effects in terms of the presence and the power of the Federal Government, that it has tentacles perhaps that we don't see in some way. Could you elaborate on that somewhat? Mr. Baker. Well, the way I use---- Chairman Thompson. What harm is it doing? If we don't have--if it is such a small percentage and we don't use what is happening, anyway, what harm does it do? Mr. Baker. Well, you forget that laws, as you well know, can be used to threaten people as well as actually using the laws for prosecution. You certainly know from your experience that when things get testy between a Federal prosecutor and the defense, there is often a threat of prosecuting for obstruction of justice or other similar charges. But let me just tell you what I tell the opening day to the criminal law class. I point out and I say, look, you may not realize it, but everybody in this room is indictable for something. And they don't believe that initially. And then I ask, well, who has ever been a salesman in here, or saleswoman? Have you ever taken anybody out to lunch, somebody who was about to make a purchase that you wanted their company to make? And, of course, somebody has done that. I have said, well, did you realize that technically what you have done violates the Federal bribery statute? And, of course, it is not that anyone is going to be prosecuted for that act. But the difference at the local level is that State prosecutors have enough good sense not to get into that stuff. They don't have time and if they did make such a case, they would be laughed out of court. Federal U.S. Attorneys don't have the same constraints. Some of the theories put forward by the Justice Department are that ludicrous. There is one case, the Kosminsky case, in which Justice O'Connor pointed out that the Justice Department theory on what constituted ``involuntary servitude'' would have made it a Federal criminal offense for a parent to threaten to withhold affection from a child who wanted to leave home. The government admitted that at oral argument. You get some very bizarre theories when Justice decides that the defendant is a bad actor and that they have to get him somehow. Chairman Thompson. Mr. Lefcourt, how much in human society today remains untouched by potential Federal criminal statutes? I mean, is there any criminal activity today--and, Professor, you, too. Is there any criminal activity today that has not been covered now by Federal law that you can think of? Mr. Lefcourt. It is just amazing. Even what used to be regulatory solely, a whole host of them in the securities field, in the environment field, in employee pensions, in welfare plans, in employing of immigrants, there is now a criminal component in all of these areas which used to be strictly regulatory. And it is hard to imagine something that the Feds can't prosecute. As a matter of fact, of course, you know about the Federal mail and wire fraud statutes, which people sometimes jokingly equate to the old Soviet Union's crime against the State, whatever it means, that through the Federal mail and wire frauds, there is just about--there is almost no activity that Federal authorities can't grab a hold of if they want it. But I would add to some of the things that the professor said in terms of the duplication and waste of tax dollars. I do mostly white-collar criminal defense work, and it is almost a typical scenario that I am worried at the same time about the local authorities and the Federal authorities, and they are both conducting investigations into a whole slew of local issues, whether it be real estate transactions in the city of New York or environmental stuff or Medicaid. They both are on top of it and have jurisdiction and are conducting investigations. Chairman Thompson. Usually Federal, usually based on wire or mail fraud? Mr. Lefcourt. Correct, but there are specific statutes in some of these areas as well. And the other thing that is really terrible about it is the effect on local law enforcement because when there is a high-profile case--and I hate to bring it down to this level, but you know that the turf wars exist, and how when there is an important case that has received a lot of attention, both the U.S. Attorney in the area, the district attorney, and maybe some other State authority are all trying to grapple for that prize. Chairman Thompson. Mr. Dorso, how does it make people in the State level feel when the implication is that you are not capable of dealing with a carjacking case? Mr. Dorso. Well, certainly, Mr. Chairman, we know we are capable of doing it, and that is the frustrating part about watching you folks do what you do. Chairman Thompson. And your association that you have there, what is the group that you are on? Mr. Dorso. National Conference of State Legislatures. Chairman Thompson. Yes, on the Justice side. Do you ever talk about these issues and what the Federal Government is doing, the conflicts or the things they are doing they should not be doing? What part of it seems to be most disturbing from a State and local standpoint? Mr. Dorso. Well, yes, we do talk about it. I suspect the No. 1 concern is the Tenth Amendment and the usurpation of States' rights. But I think second of all, and probably my colleagues feel the same, is the unintended consequences that you talked about yourself previously. The tentacles of what happens reach so far into the State and local government, talking about--as an example, someone mentioned mandatory sentencing. Well, then that starts a whole ball rolling, and then we end up with mandatory sentencing at the State level because it is politically really good because the two Senators from North Dakota supported that, so we are going to do it at the State level. And we push that down on our district judges, and now we get prisons, and as an example, our corrections budget has doubled in the last 4 years. Chairman Thompson. These decisions are made at your level, though. You make those decisions as to the trade-offs about sentences versus prisons and taxes. Mr. Dorso. You are right, Mr. Chairman. Chairman Thompson. And that is something the Federal Government doesn't have to do. Mr. Dorso. But the professor pointed out, then if you don't, then it becomes a shopping mechanism. What is better--go to the State district court or go to the Federal district court? Who wants to get the credit for this big drug bust? The intended consequences are those that come about because you have done something, we are going to react one way or another because we either get pressure from local district attorneys or whatever, or the judges come in and they say, hey, we should pass some of the mandatory drug sentencing because we don't want all of these people bringing themselves to our court, we would rather have them over at the Feds. Chairman Thompson. Professor Baker, you write about the confusion with the power under the Commerce Clause with police power, and I think you are absolutely right about that. But there also seems to be confusion that runs throughout our court system. They are buying off into that, and now the Lopez case came about, but we re-passed that law making the allegation that it is interstate commerce activity. Is there any hope in terms of the judiciary, do you see anything there in terms of the difference in the trend? And is it true from a constitutional standpoint that all we have to do is make some allegation of Federal interest or interstate commerce without actually having to prove it presumably in the criminal case that that particular gun did travel in interstate commerce? What is the state of the law, and how do you see it developing? Mr. Baker. Well, since the Lopez case has come out, the lower Federal courts really haven't taken it very far. A few district courts have. The one exception is the Fourth Circuit which ruled on a statute that has a criminal and a civil side. It ruled in a civil case, and that issue presumably will be decided ultimately by the Supreme Court. The problem in the Supreme Court, I think, as reflected in the Lopez opinion, is that some of the Justices--Justices Kennedy and O'Connor in particular--are concerned to distinguish between the criminal area and not to repeal the changes that came about in the Commerce Clause jurisprudence in 1937. And I think there is a way to distinguish the criminal area from non-criminal Commerce Clause matters, and I think there is something in Lopez that provides the basis for doing so. Lopez mentions that the defect--one of the defects in the statute--was that it failed to demonstrate on a case-by-case basis that the jurisdictional elements were, in fact, met. Now, when Congress re-passed the statute and made findings, that may have helped a little bit, but it doesn't deal with the case-by- case issue. Earlier Mr. Meese mentioned that I was going to propose possible legislation, which in concept I have run by Mr. Meese. It is based on making a distinction between the symbolic, which Judge Merritt was talking about, and the really practical aspects of a prosecution. What I was suggesting to Mr. Meese was that Congress might consider passing a general statute that applies across the board to all criminal statutes and provides that the prosecution has to prove the jurisdictional elements, not only as part of the case before the jury, but separately to the judge. This would make jurisdiction a legal question to be addressed in every case. That would allow judges to kick out a lot of these cases that they would love to kick out. For instance, the district judges in Richmond wanted to kick out a lot of these gun cases, but they couldn't go along with the defense theory on unconstitutionality. What you need to do is give them a statute where they can kick out cases that don't belong there, yet without ruling the statute unconstitutional. I think that the big struggle for the Federal courts is that very few of the judges are willing to say that Congress has gone too far under the Commerce Clause because they don't want to threaten everything that has happened since 1937. A statute that required the prosecution to prove a jurisdictional basis would make it very difficult for Justice to bring some of the screwball cases that they bring. Chairman Thompson. I have a vote on here, unfortunately. Let me ask you very briefly, you have heard the discussion concerning the Colorado situation, the discussion concerning juvenile crime legislation that is pending. Any thoughts about that? Mr. Lefcourt. Well, I for one think that the Colorado authorities should be credited for a lot of what they have been doing, and there are, of course, already in Colorado laws that could include the prosecution of families in taking responsibility for their children. I am not saying I advocate such laws, but they already have such things. It seems to me that what is better than the Senate version of S. 254 is what the unanimous Judiciary Committee of the House in H.R. 1501 has talked about. If we are going to have juvenile justice legislation, theirs is more here is the money, here are the ways you could use it, and we are not going to tell you how to use it, and we are not going to create a better--we are not going to create Federal juvenile prosecutions. You do it, you experiment, as is the State's prerogative, and go from there. And that is supported by both Republicans and Democrats unanimously on the House Judiciary Committee, and it seems to me a better way to go than to create a Federal bureaucracy. I think what was being discussed before is when you have purse strings, you can have money if you eliminate parole. And now all of a sudden you have prison costs that start to triple. Governor Cuomo during his term in New York is responsible for doubling the prison population. Essentially, prisons are being opened, and libraries and hospitals and other institutions are losing. Chairman Thompson. Professor Baker. Mr. Baker. When I was in juvenile justice, I learned that this is really a contest between conservatives and liberals over family policy in the country and each side uses the Federal funding to try to dictate policy to the States. Often, their notion of federalism is that we will tell you how to do it and here is the money to do it. But most of the money that came through juvenile justice served as subsidies for academics. It didn't really go to solve the problems. The funds went to studying the problem because the lobby behind the program consisted largely of academics who needed supplements to their income. Chairman Thompson. What do you think about the notion that we don't really know what the solutions are and let's just kind of subsidize additional research and evaluation of programs that are out there, that sort of thing? Is that valid? Mr. Baker. But research is not objective when you are talking about family issues, which is what juvenile justice is about. We know that there is a strong ideological divide in this country, and so it is going to be a question of who gets control over Federal funds, what academics get the money, and what studies they do. I saw this on pornography issues, on a whole series of issues. Chairman Thompson. In other words, if you give it to academics who think movies are the problem, that is the solution. If you give it to academics who think guns are the problem, that is going to be the solution. Mr. Baker. Exactly. You already know when you pick the academic what the bottom line of the report is going to be. Chairman Thompson. So it is like everything else. Mr. Baker. Their views are well-known ahead of time. They have written on the topic, so you know what their position is going to be. Chairman Thompson. Well, gentlemen, thank you very much. As I said, we could talk on this for a long time. You have really given us some interesting ideas. Maybe some long-term effort can be put into this and we can work together to maybe get some attention on this. I think Senator Voinovich said he is very much attuned to the civil side of things, but not the criminal. This is something that could go across ideological lines. It looks like the problem really got started in the 1970's, and we are all guilty to one extent or another for letting this happen. But for any of us who are concerned about our court system, concerned about concentration of power, this is something we really need to give some attention to, not to mention the resource question. We are lacking apparently in some of the most fundamental things. If we can't protect our national security, if we can't do something with our vast resources to protect our borders a little better, in terms of espionage, drugs, what-not, then what can we do? So we are fiddling around and throwing money in all these different directions for things that are not remotely connected with fundamental responsibilities of government, while at the same time we are not coming close, apparently, to doing our job with regard to those basic responsibilities. So maybe we can work together and do some good on this. Thank you very much for being here. The record will remain open for 5 days after the conclusion of the hearing. We are adjourned. [Whereupon, at 11:47 a.m., the Committee was adjourned.] S. 1214--THE FEDERALISM ACCOUNTABILITY ACT OF 1999 ---------- WEDNESDAY, JULY 14, 1999 U.S. Senate, Committee on Governmental Affairs, Washington, DC. The Committee met, pursuant to notice, at 3 p.m., in room SD-342, Dirksen Senate Office Building, Hon. Fred Thompson, Chairman of the Committee, presiding. Present: Senators Thompson, Roth, Voinovich, and Levin. OPENING STATEMENT OF CHAIRMAN THOMPSON Chairman Thompson. I think we need to go ahead and get started because we don't know exactly what the vote situation is going to be, other than we do know we will have some votes as we go along. But we will try to run continuously as best we can. We are considering a bill today that really goes to the basics of our Federal system. It has to do with the kind of government we have in terms of separation of powers, checks and balances. We have, as in many of our areas, an inherent and planned conflict in that we sometimes have to balance the considerations of the Supremacy Clause on the one hand with principles of federalism and separation of powers and the Tenth Amendment on the other hand. And the courts oftentimes have to deal with that balance, keeping in mind that if Congress so chooses, it can oftentimes preempt a field under the Supremacy Clause. And that is what we are dealing with here today, basically, is the question of preemption. If under the Supremacy Clause Congress decides affirmatively and clearly to preempt, there doesn't seem to be much of a problem with that. Where we get into confusion and problems oftentimes is when we get into the field of implied preemption where Congress passes a law, doesn't address the issue of preemption at all, probably is the furthest thing removed from most Members' minds as they vote for a particular piece of legislation. And, lo and behold, after a period of time, lawsuits start coming down the pike and courts are left to try to determine what Congress' congressional intent was. And they come up with all kinds of elaborate theories to determine what Congress' congressional intent was when there probably wasn't any congressional intent on a lot of the things that they have to come up with. So, basically, the question becomes: If it is a question of Congress's congressional intent as to whether or not Congress meant to preempt a certain area, who is best to express that intent--Congress or the courts? A lot of us feel like that if it is a matter of congressional intent, we would be better served if Congress was required to face up to that question and deal with it. And that is basically what the Federalism Accountability Act is. I think the act is well named because it has to do with accountability. It doesn't have to do with making those policy decisions as to whether or not a particular area ought to be preempted. I happen to think that we have gone much too far in terms of preemption. Federalism has been one of the things that I have been concerned about for a long time, or the lack of federalism. Everybody gives lip service to it. Everybody says they want it. We have Executive Orders, we pass bills acknowledging its importance, and nobody pays any attention to it. But that is kind of beside the point to a certain extent with regard to this act. All this act says is, look, Congress, if you are going to do it, face up to it, deal with it, and state that that is what you are doing. In other words, don't pass the political buck to some unelected branch of government who, years after the fact, tries to read your mind on something where there is not really any legislative history on it. And the bill would also require agencies to consider for the first time, as they are supposed to do now and they don't do--and I am going to ask Mr. Spotila here in a few minutes why that is the case, but making agencies consider these issues as they are making their rules. So that is what this is about, consideration of this piece of legislation which is S. 1214, which addresses the problem essentially of the implied preemption situation that we have that seems to be growing all the time. I don't have any up-to-date figures, but I know in the 1960's preemption cases were taking up about 2 percent of the Supreme Court's docket. In the 1980's, they were taking up about 9 percent of the Supreme Court's docket. And we are going to get more recent figures, and I dare say it is higher than 9 percent now, all having to do with or largely having to do with reading Congress' mind. So it just gets basically to whether you believe in democracy or not, doesn't it, Mr. Spotila? So, with that, any statements you have to make? Before you proceed, we will include Senator Levin's and Senator's Voinovich's statements in the record at this point. [The prepared statements of Senators Levin and Voinovich follows:] PREPARED OPENING STATEMENT OF SENATOR LEVIN Mr. Chairman, I am pleased to be a cosponsor of the Federalism Accountability Act, and I am also pleased that the Committee is beginning its consideration of this legislation today. The bill includes a provision which I introduced in 1991 to create a presumption of no preemption in Federal legislation unless Congress explicitly states its intent to preempt or unless there exists a direct conflict between Federal law and a State or local law which cannot be reconciled. Enactment of this provision would close the back door of implied Federal preemption. Over the past years, State and local officials have become increasingly concerned with the number of instances in which State and local laws have been preempted by Federal law--not because Congress has done so explicitly, but because the courts have found such preemption implied in the law. Since 1789, Congress has enacted approximately 350 laws specifically preempting State and local authority. Half of these laws have been enacted in the last 20 years. These figures, however, do not touch upon the extensive Federal preemption of State and local authority which has occurred as a result of judicial interpretation of congressional intent, when Congress' intention to preempt has not been explicitly stated in law. Article VI of the Constitution, the supremacy clause, states that Federal laws made pursuant to the Constitution ``shall be the supreme law of the land.'' In its most basic sense, this clause means that a State law is negated or preempted when it is in conflict with a constitutionally enacted Federal law. A significant body of case law has been developed to arrive at standards by which to judge whether or not Congress intended to preempt State or local authority--standards which are subjective and have not resulted in a consistent and predictable doctrine in resolving preemption questions. The presumption created by this bill will mean that silence by Congress on the subject of preemption will mean no preemption. Silence on preemption will not be an invitation for the courts to try to glean what Congress intended or what policy should be adopted. If the law doesn't address preemption and there is no direct conflict with State or local law, then this bill says there should be no judicial determination in favor of preemption. The bill also contains a requirement that agencies notify and consult with State and local governments and their representative organizations during the development of rules, and publish proposed and final federalism assessments along with proposed and final rules. There is already an Executive Order, 12612 that requires similar attention by the agencies to federalism concerns. But GAO has informed us that there is little, in fact virtually no, compliance with that Executive Order. Out of 11,414 rules issued between April 1996 and December 1998, only five rule publications contained a federalism assessment. I also asked GAO to find out how many major rules involved consultation with State and local governments, setting aside the issue of whether or not a federalism assessment was done. GAO reported to me, based on a quick review of the 117 major rules issued between April 1996 and December 1998, that 96 of those rules did not mention intergovernmental consultation despite the fact that 32 of those 96 rules had a federalism impact. In fact 15 of the 32 rules said they were going to preempt State law. Common sense dictates that State and local governments should be notified and consulted before the Federal Government regulates in a way that weakens or jeopardizes the work of State and local governments. Both past and present administrations have recognized the value of having Federal agencies consult with State and local governments. This bill would make sure that happens; it would ensure that Executive Branch agencies engage in such consultation with State and local governments and publish with the rules assessments of the impacts of such rules on State and local governments. I am pleased that this legislation has received bipartisan support, and I look forward to working with my colleagues on the Committee to resolve any issues they may have with this legislation. We have a good group of witnesses today, and I look forward to hearing their testimony as well. PREPARED OPENING STATEMENT OF SENATOR VOINOVICH Mr. Chairman, I want to commend you for holding this hearing on S. 1214, the Federalism Accountability Act. I am very proud to have cosponsored this bill with you and Senator Levin, I think it is thoughtful legislation that deals responsibly with Federal preemption. It's an issue that I have been concerned about throughout my years of government service. In fact, the Federalism Accountability Act exemplifies one of the reasons why I wanted to come to the U.S. Senate after having served over 30 years in State and local government as a county commissioner, State representative, a mayor, and a governor. I know first hand how important it is to protect the authority of States and localities to ably serve their citizens without undue interference from Washington. I wanted to work in support of this fundamental principal of Federalism ``from the inside.'' After pursuing it on the outside as President of the National League of Cities and as Chairman of the National Governors' Association, I am happy to say that months of work with my colleagues has resulted in this bipartisan, common-sense bill that we are discussing today. Mr. Chairman, one principle that we must get across is the States are not agents of the Federal Government. the Constitution and the Tenth Amendment recognized the unique and sovereign role that the States play in our democracy and it is a role that we must maintain. There has been a great deal of progress in recent years in restoring this balance between the States and the Federal Government, and I think we can all be proud of that. The Unfunded Mandates Reform Act of 1995, the Safe Drinking Water Act Amendments of 1996, Medicaid and welfare reform, and the recently enacted ``Ed Flex'' and tobacco anti- recoupment measures are all examples where the effectiveness of States and localities have won out over Washington bureaucracy. Yet despite these welcome victories, the war over Federalism is not won. There is an excellent article to this effect called ``The Dual Personality of Federalism,'' written by Carl Tubbesing, which appeared in the April 1998 issue of State Legislatures magazine, and I certainly recommend that my colleagues read this article if they have not already done so. The article notes that for all the progress made in devolution, flexibility, and more responsibility for the States, there are growing dangers in increased Federal preemption and the centralization of policymaking in Washington. Frankly, I see it every week as I vote on legislation in the Senate, whether it be the Juvenile Justice Bill or this week's debate on the Patients' Bill of Rights. When the Federal Government preempts State and local laws, it can erode the ability of State and local governments to protect consumers, promote economic development, and develop the revenue streams that fund education, public safety, infrastructure, and other vital services. The current Federal moratorium on all State and local taxes on Internet commerce--taking away a possible revenue source from a governor if he or she so chooses--is just one striking example that could have a devastating effect on the ability of States and localities to serve their citizens. The danger of this growing trend toward Federal preemption is the reason the Federalism Accountability Act is so important. The legislation makes Congress and Federal agencies clear and accountable when enacting laws and rules that preempt State and local authority. It also directs the courts to err on the side of State sovereignty when interpreting vague Federal rules and statutes where the intent to preempt State authority is unclear. I am particularly gratified that this legislation addresses a misinterpretation of the Unfunded Mandates Reform Act as it applies to large entitlement programs. The Federalism Accountability Act clarifies that major new requirements imposed on States under entitlement authority are to be scored by the Congressional Budget Office as unfunded mandates. It also requires that where Congress has capped the Federal share of an entitlement program, the accompanying committee and CBO reports must analyze whether the legislation includes new flexibility or whether there is existing flexibility to offset additional costs incurred by the States. This important ``fix'' to the Unfunded Mandates law is long overdue and I am pleased it is included in our federalism bill. Finally, I would like to join the Chairman in welcoming our witnesses here this afternoon, particularly my good friend Governor Tom Carper, who is chair of the National Governors' Association. It is truly amazing how much can get done when legislation is introduced on a bipartisan basis. Having, myself, served in his current capacity, I appreciate the importance that this legislation means to the NGA for him to appear here to present his views. I appreciate the great relationship we continue to have with the National Governors' Association and other State and local government associations. We would not be where we are today without their help. Thank you, Mr. Chairman. TESTIMONY OF HON. JOHN T. SPOTILA,\1\ ADMINISTRATOR, OFFICE OF INFORMATION AND REGULATORY AFFAIRS, OFFICE OF MANAGEMENT AND BUDGET Mr. Spotila. Good afternoon, Mr. Chairman. Thank you for inviting me to appear before you today. The last time I was here, I was seeking your support for my confirmation. I appreciate your help and all the courtesies you extended. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Spotila appears in the Appendix on page 291. --------------------------------------------------------------------------- Chairman Thompson. Should have had this hearing first. [Laughter.] Mr. Spotila. I do recall some questions on this even then. But I do appreciate all your help and courtesies you extended to me in the confirmation process, and I do look forward to working closely with you and your staff in the months to come. At the outset, on behalf of the President, I want to emphasize our commitment to the principles of federalism and our respect for the Tenth Amendment to the Constitution. And, Mr. Chairman, as you rightly have pointed out, the National Government has limited powers and, generally, government closest to the people works best. President Clinton, a former Governor, has actively encouraged intergovernmental consultation in his issuance of Executive Orders 12866 and 12875 and his support for and signing of the Unfunded Mandates Reform Act. You have asked me to discuss S. 1214, the Federalism Accountability Act of 1999. This bill seeks to promote the integrity and effectiveness of our Federal system of government. It clearly represents a serious effort to guide relations between the Federal Government and State and local government. We respect and support that effort. We do have concerns, however, that S. 1214 could have unintended consequences. These may include burdening agency efforts to protect safety, health, and the environment by imposing new administrative requirements and by encouraging additional litigation. The administration believes that these aspects depart from the approach adopted in the Unfunded Mandates Reform Act, which it supported and is implementing. We believe that S. 1214 needs some revision if it is to accomplish its goal effectively. We would welcome the opportunity to work with you and your staff in this regard. Today the Department of Justice will be discussing the administration's concerns with Section 6 of the act, ``Rules of Construction Relating to Preemption.'' My testimony will focus on views on Section 7, ``Agency Federalism Assessments.'' We do have some other drafting comments that we would like to share with you and your staff at a later point, but they are not part of my testimony today. Our primary concerns with Section 7 revolve around the interaction between its creation of new rulemaking requirements and the potential for harmful litigation arising from them. Section 7(a) would require each rulemaking agency to designate a special federalism officer to serve as a liaison to State and local officials and their designated representatives. Section 7(b) would require each agency, early in the process of developing a rule, to ``consult with, and provide an opportunity for meaningful participation'' by public officials of potentially affected governments. Section 7(c) would require agencies, when publishing any proposed, interim final, or final rule which the federalism official identified as having a federalism impact, to include in the Federal Register a formal federalism assessment. Each of these federalism assessments would involve four mandatory components: Identifying ``the extent to which the rule preempts State or local government law,'' analyzing the extent to which the rule regulates ``in an area of traditional State authority'' and the degree ``to which State or local authority will be maintained,'' describing the measures the agency took ``to minimize the impact on State and local governments,'' and describing the extent of the agency's prior consultations with public officials, the nature of their concerns, and ``the extent to which those concerns have been met.'' These requirements may not be unreasonable in themselves. As now written, however, S. 1214 raises the risk that agencies could face litigation on each subcomponent of these requirements. The resultant need to document formally each and every aspect of an agency's compliance with each subcomponent could involve a significant new administrative burden. This is particularly true for agencies who are trying to implement laws and protect public health, safety, and the environment with limited resources. Even if an agency has acted in good faith, litigation can cause delays and drain scarce resources. To avoid such excessive litigation, the administration feels that S. 1214 should include a statutory bar to judicial review of agency compliance with its provisions. There are practical implications in this regard. Currently, agencies reach out to State, local, and tribal governments and their representatives on a regular basis to hear their concerns and discuss important rulemakings. These discussions typically proceed in a spirit of intergovernmental partnership, often informally, after reasonable efforts to reach those most likely to be interested. Thus, as a general matter, we believe agencies already carry out consultations as envisioned in Section 7 and do so in a meaningful way. Our concern here revolves around increasing the potential for litigation. If we make these collegial, informal discussions subject to the possibility of judicial review, it would change the whole dynamic. Rather than discussing matters openly in a spirit of partnership, some agencies could resort to checklists--building up a record that proves that each step has been carried out. Instead of working to improve their rules, agencies might shift their focus to improving their litigation position. This will divert scarce resources. Agencies would feel compelled to prove that each step has been carried out fully. They would create a prerulemaking record as formal and objectively documented as their counsel deems necessary to withstand a court challenge. It is not at all clear that this will lead to better rules, despite the good intentions embodied in Section 7. How might this play out? Here is an example: Section 7 directs each agency to ``provide an opportunity for meaningful participation by public officials of governments that may potentially be affected.'' We agree that agencies should do that. But allowing judicial review of agency compliance with this provision would permit potential litigants to ask a Federal judge to decide a wide variety of new issues. How much notice is legally adequate to ``provide an opportunity''? How much outreach efforts does an agency have to make to seek ``meaningful participation''? If an agency conducts extensive consultations with some of the Big 7, can others of the Big 7 litigate their failure to be included? What about individual State or local governments that do not agree with positions taken by the Big 7? Do they each need to be invited to participate? The agencies would have to consider, plan for, and determine how to resolve questions like these. This would take time. It also might keep them from other important tasks, like paperwork reduction initiatives, the review and revision of outdated and burdensome existing rules, and the conversion of rules into plain language. For that matter, each agency would have to do more than just ensure that all of those who were supposed to be notified and consulted were satisfied with the agency's compliance with Section 7. Others with an interest in the rulemaking--including various special interests--could potentially challenge the rulemaking because they were not satisfied with that compliance. They might even do so just to hamstring the agency and slow down its regulatory efforts. Agencies would have an even broader group to consider when designing a consultation effort. We all know what road is paved with good intentions. While we respect the careful thought and sincere concern underlying S. 1214, we believe that it requires some changes to avoid unintended, adverse consequences. We would be pleased to work with you and your staff on these issues. Thank you for the opportunity to appear before you today, and I would be happy to answer any questions you may have. Chairman Thompson. Thank you very much. Mr. Moss. TESTIMONY OF RANDOLPH D. MOSS,\1\ ACTING ASSISTANT ATTORNEY GENERAL, OFFICE OF LEGAL COUNSEL, U.S. DEPARTMENT OF JUSTICE Mr. Moss. Mr. Chairman, Members of the Committee, I am honored to be here today to testify regarding S. 1214, the Federalism Accountability Act of 1999. As Mr. Spotila has indicated, my remarks will focus on Section 6, which would establish rules of construction relating to statutory and regulatory preemption of State law and, more broadly, rules of construction relating to any Federal law touching upon the authority of the States. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Moss appears in the Appendix on page 296. --------------------------------------------------------------------------- Section 6(a) and 6(b) would significantly alter the rules under which courts determine the preemptive effect of Federal statutes and regulations. In our view, sweeping reform of this nature would be warranted only if Congress were convinced that existing preemption doctrine systematically operates to frustrate congressional intent and that the new rules of construction would produce better results. Section 6(c) would operate even more broadly than Section 6(a) and 6(b). It would require that any ambiguity in any Federal law, whether pertaining to preemption or to any other subject, be construed in favor of preserving the authority of the States and the people. Section 6(c) threatens to frustrate congressional intent wherever Federal law implicates the allocation of power between Federal and State governments. First, I would like to explain our view that Section 6(a) and 6(b) would fundamentally alter long-established preemption doctrine in ways that may create significant new problems. It should only be adopted if necessary to correct equally fundamental misinterpretations of congressional intent by courts and administrative agencies. Federal statutes may preempt State law in either express terms or implicitly. In either case, congressional intent is, of course, the touchstone of preemption analysis. Thus, implied preemption requires clear evidence of congressional intent to preempt, such as the establishment of Federal requirements that conflict with State law or that occupy an entire field. Further, the courts require a heightened showing of intent to preempt in areas of traditional State primacy. The Supreme Court has stated that, ``[w]hen Congress legislates in a field traditionally occupied by the States, `we start with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.' '' Thus, current Supreme Court doctrine already reflects considerable sensitivity to federalism concerns. Section 6(a) would, nevertheless, alter existing law. No Federal statute enacted after this provision took effect would preempt State law unless the statute contained an express statement of Congress' intent to preempt or there was a ``direct conflict'' between the Federal statute and State law so that the two could not ``be reconciled or consistently stand together.'' This change would appear to abolish the doctrine of field preemption and impose significant new limits on conflict preemption. State law that prevented the achievement of purposes of the Federal statute could stand so long as there was no direct and irreconcilable conflict between the two. The findings section of S. 1214 states that this change is motivated by Federal court rulings that have applied current preemption doctrine to produce results ``contrary to or beyond the intent of Congress.'' It is not clear, however, which applications of existing preemption doctrine are viewed as having misinterpreted the intent of Congress. Before altering such broad-reaching and fundamental rules of law, rules dating back to the early days of the Republic, it is essential to consider whether some less drastic action might redress the problem. Section 6(a) would be likely to increase congressional reliance on express preemption provisions. We are concerned that this would raise problems of its own. Detailed express preemption provisions may be prone to overinclusiveness, displacing State law where such displacement is not truly necessary, and underinclusiveness, undermining the effectiveness of Federal law by failing to displace antithetical State law. Some of the harshest criticism of Federal preemption has focused on the operation of express statutory provisions contained in such legislation. In addition, implementation of Section 6(a), as well as the other rules of construction contained in Section 6, would generate disputes as to whether subsequent congressional action implicitly intended to exempt particular statutes from these rules of construction. Section 6(b)'s proposed changes to current regulatory preemption doctrine raise similar and additional concerns. The Supreme Court has permitted the issuance of preemptive regulations under broad grants of rulemaking authority where preemptive regulations represent a reasonable accommodation of conflicting policies that Congress left to the rulemaking agencies to reconcile. Section 6(b) would alter the Supreme Court's approach. A Federal rule issued after the effective date of the Federalism Accountability Act could preempt State laws in only two circumstances: First, if regulatory preemption was authorized by statute and the regulation was accompanied by a statement in the Federal Register explicitly stating that such preemption was intended; and, second, if the regulation directly conflicted with State law. Unlike Section 6(a), which applies only to newly enacted statutes, Section 6(b) would arguably apply to the implementation of many existing statutes. If this interpretation were to prevail--if this were the interpretation that was intended, existing rulemaking authority in a great many areas would be constricted, even if the statutory source of rulemaking authority remained unchanged. Enactment of Section 6(b) in its current form would engender significant confusion. Uncertainty and the threat of litigation could be especially serious for agencies that are called upon to update and revise complex regulations under longstanding statutes that lack specific and express authorizations to issue preemptive rules. At a minimum, Section 6(b) should be revised to clarify that agencies that now possess authority to issue preemptive regulations under their existing statutes and case law may continue to do so and that Congress does not need to revisit the dozens of statutes that have been on the books for decades to consider in each and every instance whether the agency should continue to have that authority. Under Section 6(c), any ambiguity in S. 1214 or ``in any other law of the United States''--predating or postdating the Federalism Accountability Act--would ``be construed in favor of preserving the authority of the States and the people.'' This provision would apply to any ambiguity in any Federal law, whether pertaining to preemption or to any other subject. The implications of an instruction of this sweeping scope are difficult to assess, although the potential for far-reaching and unanticipated consequences is troubling. It is unclear, for example, how Section 6(c) would apply to statutory and regulatory language that, although ambiguous on its face, has been clarified by case law or administrative interpretation predating the enactment of Section 6(c). Special difficulties would arise in the interpretation of Federal laws that limit State authority in ways that arguably enhance the authority of the people. Thus, one wouldn't know which section of Section 6(c) to rely upon. Due to its breadth and generality, Section 6(c) would create a risk that unintentional ambiguities in Federal statutes and regulations, with only tenuous connections to the balance between Federal and State power, could be exploited in unforeseen ways to frustrate the intentions of Congress and rulemaking agencies. Mr. Chairman, thank you for the opportunity to share these observations, and like Mr. Spotila, I would be happy to answer any questions. Chairman Thompson. Thank you very much. I would be remiss if I didn't acknowledge my appreciation of the strong support by the State and local governments, as well as many of my colleagues on both sides of the aisle. Senator Voinovich certainly has been a leader in this effort, and we are very pleased that, with his experience, he is coming on this Committee and leading the effort in this respect, and also Senators Levin, Roth, and Cochran on this Committee for their valuable support and assistance in developing this legislation. I appreciate both of you being here today, and you have had some discussions with our staff, and I think it has been in the spirit of cooperation and seeing whether or not we couldn't come up with something that would serve our purposes without creating additional problems. But I sit here and listen, and I am struck by--I have never seen a place that is so intent on passing laws and regulations and is so scared to death of litigation. Congress passes law after law after law, but we don't want any litigation over it. And rules after rules after rules after rules are passed, but we don't want any litigation. What that basically means is that we don't want anybody challenging what we are doing, and, therefore, we don't want judicial review and we don't want to have to answer to any of that. But that is really not our system, and we have seen in this particular area that if there are no sanctions connected with these rules, with these laws, then they are not carried out. It seems that we develop--we come up with these broad policies and broad statements like the values and benefits of federalism and consultation and all of that, and we all agree on that and say that we should do that. But we really don't want any mechanism that is going to in any way require us to do that. Just trust us, we will do the right thing. But we have seen in this area where we are not doing the right thing. Mr. Spotila, you ought to know better than anybody with regard to the Executive Order on federalism that it has been routinely ignored. We make these statements. The President makes these statements. He puts it in an Executive Order, and the President's own Executive Order--of course, this is a carryover but it is still in effect. And your shop is the one that is supposed to be seeing that these things are carried out and the Executive Order--over 11,400 rules. There were five federalism assessments. How can you come up here and say, we don't want any judicial review of all this, we agree with you and we are going to do it, and we are doing it, when you are obviously not? Now, you have been there a short period of time, and so you are going to get a little leeway. I emphasize the word ``little.'' But tell me about that. How can you reconcile the fact that if we don't have some kind of judicial review for this thing that we all say that we love and we want and we want to do, that we really will carry it out when it stands in the way of some regulator or someone else from doing what he wants to do unfettered? Mr. Spotila. Let me say a couple of things. Let me begin by saying that I am a firm believer that Executive Orders should be complied with and certainly laws should be complied with. There is no question about that. In instances where there is a need for better enforcement, then I think that is something that we should pay attention to. So I do agree clearly with that. In the instance of Executive Order 12612, which was signed in 1987 originally by President Reagan and carried forward by President Bush---- Chairman Thompson. And carried forward by President Clinton. Mr. Spotila. And carried forward by President Clinton until--we know that there was an effort and a new Executive Order which was then suspended and so forth. I think that the truth is probably somewhere a little in between. By that I mean I don't think that this order has been well enforced probably by any of those three administrations from what I have been able to gather and from what I saw largely as an agency general counsel. I think that it was enforced more--it was complied with more by agencies than the GAO report probably gives credit. I think that in some instances with---- Chairman Thompson. You mean 10,000 out of 11,000 instead of five or what? Mr. Spotila. The GAO referred to the number of times that the preamble to a rule cited the Executive Order and used that as a guide, which is probably a pretty good indicator. I certainly would not suggest to you that there was widespread compliance with this order. I think, though, that there was some attention given to federalism implications in the agencies. There has been and continues to be. In 1993, when President Clinton issued Executive Order 12875, that called for an emphasis on consultation, and which was followed by the Unfunded Mandates Reform Act, the agencies got a clear message that the White House, that the President, wanted them to give a lot more attention to consulting and to be particularly sensitive to the problems of unfunded mandates. Neither of those was directed at preemption, but both of those were focused on items that are important and that relate to federalism and that we care about. I think that the agencies have given more attention to this. Our reports identify agency action that were not dealt with by the GAO in its report and that tell a story of more compliance than GAO would indicate. None of that, though, is to say that that is an ideal situation or that---- Chairman Thompson. Well, while we are on the subject--the proof is in the pudding in terms of the extent of compliance. And I am looking at the statement of Professor Gellhorn who will be testifying here in a few minutes. But he says, ``One empirical survey undertaken for the American Bar Association's Section of Administrative Law and Regulatory Practice showed that requirements not pressed by the Office of Information and Regulatory Analysis''--that is your office--``the office with responsibility in OMB for implementing the regulatory Executive Orders, or subject to judicial review, have been ignored rather than implemented by the agencies.'' ``Another review of agency rules between 1996 and 1998 by GAO shows that agencies generally have paid only lip service to the Executive Order on federalism. In fact, EPA did not mention the order in any of the 1,900 rules issued in this period, and only 5 of over 11,414 agency rules issued during these 2 years indicated that a federalism assessment had been done.'' So, we are past the point of debate, really, I think, in terms of whether or not this has been given any credence, any lip service to it, no priority by your office, clearly. Do you have a review checklist that lists the things that you check these agencies on? Mr. Spotila. When rules are considered, this is one of the elements that OIRA staff---- Chairman Thompson. This should not be a partisan matter. You brought it up. But I have to say that President Reagan raised this issue in his Inaugural address, issued this Executive Order, and his OMB Director then sent a directive to the agencies reiterating the importance of the order. President Bush personally sent a directive to the agencies to the same effect. But the real proof is in the pudding here in terms of these statistics. It just gets back to how much importance you place on this. Now, when you were over at the SBA, the matter of the Regulatory Flexibility Act came up, and that requires agencies to determine if there is a significant impact on certain small entities, and if there is, they are supposed to do an analysis and take steps to alleviate all of that. And when you were at SBA, you supported, along with the Vice President, giving judicial review. Now, is the impact on these small entities or these small businesses important, more important than impacts on States? Mr. Spotila. I was a supporter and am a supporter---- Chairman Thompson. Of local governments? Mr. Spotila. Of judicial review in the context of the Regulatory Flexibility Act. Candidly, I think that it has been constructive to have it. The agencies take their requirements more seriously because of it. Having said that, a lot of attention was given to how to focus that judicial review provision narrowly to accomplish better compliance without opening up an enormous amount of excessive litigation. And those are some of the same concerns that I am referring to today. I think that we need---- Chairman Thompson. So you think we could focus ours in a way that would serve the same salutary purposes that---- Mr. Spotila. Well, the short answer to that is yes. As a little longer answer, the President has already signed the Unfunded Mandates Reform Act, which has a judicial review provision. He has indicated he would sign S. 746, which also has a targeted approach. So I think it would be a fair assumption to say that a targeted approach would be something we could--we ought to be able to agree on. But if we are too indiscriminate, then there is a real risk of excessive litigation, and I do not think that serves the public interest. Chairman Thompson. Mr. Moss, moving to Section 6, the rule of construction, you talk about the fact that this alters long- established doctrines. But the long-established doctrines that it alters are judicial doctrines which are trying to interpret our intent. Right? Mr. Moss. Correct. Chairman Thompson. Don't you think we have a dog in that fight? I mean, we ought to be able to state what our intent is. We should be willing to do that, shouldn't we? Mr. Moss. I absolutely believe that you have a very big dog in that. Chairman Thompson. We won't say what kind, but just---- [Laughter.] Mr. Moss. A very positive dog in that. What I would say, though, is that it is unclear to me whether moving to a system in which you have what I would call a framework rule that applies to future enactments, which provides only for express preemption or direct conflict preemption, is one that, in fact, in the long run will best capture congressional intent. Some of the most contested, difficult cases in the Supreme Court--you mentioned the increase in cases dealing with preemption. Some of the really big Supreme Court cases recently in preemption have been figuring out what express preemption provisions mean. The Cippolone case dealing with the cigarette warnings, the Medtronics case dealing with the medical device amendments, some of the most contested issues have dealt with that. In addition, some of the most heated, I think, attacks on preemption have been in the area of express preemption, attacks on the broad express preemption provision in ERISA. Chairman Thompson. But those are policy debates. Mr. Moss. They are policy debates, but I think that there are still questions that go to whether---- Chairman Thompson. So you are basically saying it is impossible for us to express our intent. Mr. Moss. No, not at all. I believe---- Chairman Thompson. That it is very difficult. Mr. Moss. I believe that Congress should do so. I suspect that, although perhaps more difficult in the long run, it may be best done on a case-by-case basis rather than in a piece of framework legislation like that. I can give you an example of what I mean by that. Chairman Thompson. Well, you can still--you can do it on a case-by-case basis the other way. If we are concerned--and some of the witnesses that come after you will have some instances, and which I believe to be the case, where there are more and more cases where you have these confusing doctrines butting heads with each other and inconsistencies and courts coming up with these interpretations that are inconsistent with one another. So if we conclude that and we decide that we want to lay down a framework and say unless we say otherwise, here is the rule. Mr. Moss. Right. Chairman Thompson. That doesn't keep us from saying otherwise. In a given case, we can wipe the whole thing out if we choose to in a given case. The question is: What is the general rule going to be when we are silent on the issue? That is the issue here, isn't it? Mr. Moss. I believe that is correct, although I think that it is even the case that where you are silent on the issue in the subsequent enactment, there are going to be debates, and the courts in the end are going to have to figure out what congressional intent is. To give you an example, another type of framework--there is not a great deal of framework legislation of this type, but another piece of framework legislation of this type dates back, I believe, to 1871, and it is the Dictionary Act. And it says unless Congress says otherwise, this is what these terms are going to mean. In a case called Monel, Justice Brennan writing for the Supreme Court looked to the definition of the word ``person'' in the Dictionary Act. He said the word ``person'' in the Dictionary Act includes a body politic, and, therefore, it must include municipalities. And, therefore, one can bring an action against a municipality under Section 1983. In a subsequent case called Quern v. Jordan, Justice Rehnquist was writing for the majority, and the question was whether that same analysis would apply to States. And Justice Rehnquist said the Dictionary Act is just too thin a reed to rely upon, to rely on that definition in an 1871 statute to decide whether States should be subject to an action under Section 1983. There was nothing in the 1983 statute itself which addressed that. But the Court still had to wrestle with the question of what congressional intent was and whether implicitly Congress reached a different conclusion. Chairman Thompson. That wasn't a preemption case, was it? Mr. Moss. It was not a preemption case. Chairman Thompson. There can always be an issue as to what a particular word means, especially over a long period of time. It sounds like a significant length of time past that. I am not saying that it would never produce any litigation, but this litigation you are concerned about needs to be juxtaposed to the litigation that we have. I mean, we are just replete with litigation now, taking wild guesses as to what congressional intent is. This isn't a panacea that is going to foreclose every possible issue. And we will, if we decide to preempt, state so in clear, explicit language, hopefully. But I don't think we ought to get too hung up on throwing our hands up and saying, we are unable to express our intent. If that is the case, then we are in worse shape than I thought. Mr. Moss. I entirely agree that Congress should as clearly as possible express its intent. But let me just mention two other cases that come to mind in defense of implied preemption. Few people realize that perhaps one of the great decisions ever decided was an implied preemption case, and that is Gibbons v. Ogden. That is the case decided by Chief Justice Marshall in 1824 that opened up our markets to interstate commerce. And I think people generally studied the case in law school and think of the case in law school as a case which establishes the broad power of Congress to regulate interstate commerce. But the ultimate holding in the case, Chief Justice Marshall comes down and says I don't need to decide in this case whether the power to regulate interstate commerce is exclusively for the Federal Government and whether the States have a role here. The State of New York imposed a monopoly on steamboat traffic between New York and New Jersey, and Chief Justice Marshall said there is a Federal statute that provides for licensing of ships that are involved in the coastal trade. And I think an implication of that must be that Congress would have intended not to allow States to impose these sorts of monopolies and limitations. And, therefore, as a matter of implied preemption, Chief Justice Marshall concluded that the markets had to be opened up and economic development began in earnest, and the case was widely received as one of the great decisions at the time it came down, even by those who were strong supporters of States' rights. Chairman Thompson. So what is your point? Mr. Moss. That implied preemption at times is extremely important and has a long history dating back to the early---- Chairman Thompson. It is important--I mean, if it carries out the intent of Congress, it is important. Mr. Moss. Yes. Chairman Thompson. And if it doesn't, it is important, too. But, I mean, that is the issue. Is a decision such as that carrying out the intent of Congress? And what you have there is a judge having to decide, as the courts often do, what the congressional objectives are, what the national purposes are. My point is this legislation would void all that. Mr. Moss. Let me give just another example, Mr. Chairman-- -- Chairman Thompson. I will tell you what. Give it to Senator Voinovich because I have taken too much time. Mr. Moss. As have I, and I appreciate your indulgence. Chairman Thompson. We will have time. Senator Voinovich. I would just like to say that I appreciate the thorough evaluation that you have given of the legislation, and I for one will take it into consideration. And if we think that any of your points are well taken, we will try to incorporate them into the legislation. I happen to be one that feels that the more clarity we have in this area, the better off we are all going to be. I think the more consultation that we have with each other, the better off we are going to be. And that is really the kind of environment that we are trying to create through this legislation. Chairman Thompson. Thank you very much. Senator Levin. Senator Levin. Thank you, Mr. Chairman. I was intrigued by your last statement about the value of implied preemption. Just a few minutes before that, you said it is desirable that Congress be as clear as possible as to whether or not it intends to preempt. Those are inconsistent statements. Mr. Moss. I don't believe so, Senator Levin. For example, one could imagine a circumstance in which Congress thinks as carefully as any group of human beings could possibly consider an issue. They think about every angle on it, and they draft a Federal law to address a problem. Twenty years later, the States for the first time start adopting some new form of regulation in the area that poses an obstacle to the Federal statute. No one in Congress at the time could have been expected to have foreseen this development. The development interferes with achieving Congress' purpose. And under this statute, it is unclear whether the Federal statute would be allowed to achieve its goal. And maybe in those circumstances Congress would then have to go back and re-evaluate the issue. So I don't think that it is always going to be the case that the rule that says that Congress always must be expressed or there must be a direct conflict will always best achieve congressional intent. Senator Levin. Well, I think you just put your finger on what the answer is, that if something crops up where the Congress now sees it is important to preempt, it can just simply adopt a preemption provision as an amendment to that law that was passed 20 years ago. But to use that as an example of why implied preemption somehow or other is desirable, when you yourself say as a general matter it is important to not do anything by implication, it is important that we express one way or the other, it seems to me in general are inconsistent statements. Mr. Moss. Well, I respectfully disagree with that, and one reason I think I disagree is that these categories are not as neat as we would like to think of them. And, in fact, conflict preemption is a form of implied preemption. The two major categories are express preemption where Congress says we are preempting X, Y, and Z, and there is implied, which includes conflict preemption, field preemption, obstacle preemption. And Justice Black very eloquently in a case decided, I believe, in 1941 named Hines said that it is extremely difficult to figure out which of these categories something fits into, but in the end the goal is to figure out what Congress intended. I think that the courts by and large are very respectful of that. They have rules and presumptions against finding preemption where it interferes with an area of traditional State regulation. And if there are areas in which Congress-- where the courts have been finding preemption and Congress didn't intend it, I think that is something that obviously needs to be considered in the first instance to figure out whether there are particular areas that need to be fixed. Senator Levin. I think Congress is in a lot better position to determine whether it intends to preempt States than courts are through rules of construction which are incredibly complicated trying to divine what that congressional intent is. It is far better, it seems to me, to know what the congressional intent is, or in the event that it is unknowable or unknown or unspecified, than for Congress to say which way it wants this to go. Do we want to preempt in the absence of an express preemption or a conflict or not? And if we say the presumption is that we do not want to preempt the States from acting, unless we expressly state so or unless there is a direct conflict, it seems to me that is a lot clearer guidance to a court than these rules that have been created over time, and it ought to be welcomed--I would think it would be welcomed by a court. I will leave that there, but your analogy as to how at times the absence of any clarity in law and the courts trying to figure out Congressional intent has led to a good decision reminds me a bit of saying, well, President Roosevelt during the 1930's was able to either ignore or evade the Neutrality Act, or whatever it was called, through our Lend-Lease Program; therefore, it is great for Presidents to evade our laws just because we have a good circumstance there. I am all for it. Looking back in history, I am glad the President--I hope I would have been at the time--engaged in the Lend-Lease Program; therefore, I am glad the President evades our laws. But that can't be our general principle because I can come up with an example of where it was good that a President did evade our laws. So I don't think your--going back to the Marshall case is a particularly good one. Just because you can pull out an example where there was silence and, therefore, a very creative, wonderful Supreme Court Justice was able to reach a great decision is not, it seems to me, a very good argument for a policy of silence being something which leads to good results. Mr. Moss. If I can just say one thing quickly, Senator. It was not my intent to suggest that the court should reach out and just come up with good results in cases contrary to what Congress intended but, rather, that I am not convinced, based on my reading of the cases, that a rule that says there must be an express preemption provision is in the long run going to better capture congressional intent. And in my looking at the cases, I see enormous debate and complexity in discerning express preemption provisions, and it is unclear to me that the courts are getting closer to congressional intent with those than they are in the implied preemption, where they are quite deferential. Senator Levin. You are saying that you don't think a court is given more guidance by an express statement of preemption than it is by silence. That is what you are saying to me. And it seems to me that has palpably just got to be wrong. That goes directly counter to what you earlier said, which is we should express our position on preemption. Do you want us to do it or not? Now, if you want us to do it--and I do, I think most of us do--then you have to take that position even though it may be not totally conclusive and even though there may be questions, as the Chairman pointed out, that remain for a court to try to figure out. You can't have it both ways. You either want us to express our intent or you don't. Which do you? Mr. Moss. I think it is preferable for Congress to express their intent, and---- Senator Levin. Even though there may be some open issues for a court. Mr. Moss. Sure. Yes. Senator Levin. I think that is a better position, but it is inconsistent, I am afraid, with a few other directions that you have taken or tried to take this morning. Mr. Moss. Well, respectfully, Senator, I don't think---- Senator Levin. You don't have to be that respectful. You can just disagree period. [Laughter.] Mr. Moss. I think there is a difference when one is dealing with a type of framework legislation like this where in 1999 Congress passes a rule like this that presumably will be on the books for many decades to come and future Congresses will be guided by it, compared to a circumstance where Congress sits down in a particular context and says what is it exactly we want to do here and let's say as clearly as we can what we want to do here, which I think is a very good thing. Senator Levin. Another area I want to go into with you is also an area which the Chairman got into, and that is the failure of apparently three administrations in a row here now to prepare federalism assessments. We had an Executive Order back in 1987 of President Reagan. Now we are going into the seventh year of the Clinton administration. According to the Acting Director of OIRA, that Executive Order basically has never been followed, apparently, through three administrations, if I read this correctly. We know from a test in the last 2 years it has never been followed. Apparently, it wasn't even followed during the administration in which it was issued. That, it seems to me, presents an awfully good argument for us to incorporate into law the requirement rather than using it as, apparently, I think you do as a reason for why we shouldn't do it because it has never been followed. Isn't the fact that that Executive Order has been ignored administration after administration reason for why we should act, why we should put its requirements in law, including the federalism assessment, rather than using that as I think it has been used by the administration as a reason not to act? Mr. Moss. Let me---- Senator Levin. I think I should go to Mr. Spotila. I am sorry. I agree. You are looking over to your right and I will look over to your left. Mr. Spotila. I thought maybe I was going to escape that one. Senator Levin. No. Mr. Spotila. Senator, as I said, right before you came in, I am firmly convinced that Executive Orders should be complied with. They must be complied with, as must laws, with or without judicial review. I don't have direct experience on OMB's relationship with Executive Order 12612, but I have been advised, as you have alluded to, that it appears that for three administrations this was not enforced by OMB. It is unclear whether GAO has captured precisely the amount of agency compliance with the Executive Order, but there seems to be a general sense that there wasn't much compliance, if any. I think that the efforts in this administration began with Executive Order 12875 on consultation and then the effort to come up with a new Executive Order that would deal with preemption as well as consultation and unfunded mandates last year. That effort recognizes that there is a need for guidance to the agencies and that with clear guidance then we would be in a position to compel the agencies to do what is appropriate. Having said that, if the Congress determines that it would add value to legislate in this area, then I don't think we object to that concept. It becomes a matter of how to do it and whether we can avoid unintended consequences. Senator Levin. Putting aside the judicial review question just for a minute, do you support, does the administration support a requirement that there be a federalism assessment in law? Mr. Spotila. I think the administration believes that it is not necessary for it to be in law, that it can be dealt with through an Executive Order. I believe that is the administration position. That does not necessarily mean that the administration would not--that the President would not sign such a bill, but it does mean that they feel that an Executive Order can be shaped in an effective way to deal with this issue. Senator Levin. Thank you. If history is any guide here, the Executive Order which has been on the books for 12 years has been ignored, which is one of the problems with Executive Orders, by the way. We face this all the time. I am looking at a former chief executive here, so I am a little bit worried about saying that here. But we find too often that the administrative agencies simply ignore what is in the Executive Order, and they get away with it because it is not in statute. So we face this in a number of areas where we have to put in statute something in order to make sure it gets done. And I think it is very clear from the history of this that this is one such example. I think maybe I have gone over time, but those are all the questions I have. Thank you, Mr. Chairman. Chairman Thompson. Along those lines, we are right in the middle now, apparently, of your negotiating with State and local government representatives on a new Executive Order. I mean, that has been up in the air for some time now, hasn't it? Aren't you in the process of negotiating one? Mr. Spotila. The administration is in the process, yes. I have not personally been involved yet in that, but---- Chairman Thompson. Who is handling that? Is Ms. Katzen still handling that? Mr. Spotila. She has some involvement in it, yes. She has the advantage of having worked on this issue for some time now and has been one of the people involved. Chairman Thompson. I know she has, and we have got some questions for her, too, when she comes up for confirmation. Mr. Spotila. I know that there is a significant effort to try to reach an understanding, and I think people---- Chairman Thompson. Well, the administration tried to repeal or supersede the Executive Order we have been talking about with a new Executive Order, which caused great concern among a lot of the people affected on this federalism issue, and without consulting with State and local representatives, even though the Executive Order would require consultation with State and local representatives. So they weren't even--in the process, they weren't even complying with the Executive Order that they were trying to get done. I mean, how much more evidence do we need for the need to legislate in this area? I don't know what is going to come out of that, but I will guarantee you one thing: If because of everything else that is going on some reluctant acknowledgment is made in some Executive Order about federalism, with this history it doesn't mean a whole lot to me in terms of this legislation. I am more than willing to work with you on the judicial review. I don't want to bog this thing down. I must say that the elements that have to be complied with by the agencies are of a little different category than in some of the things that we deal with here. We might could use the Regulatory Improvement Act as a model for judicial review. But the requirements here have to do more with assessments and descriptions and analysis under this federalism bill. If it really doesn't go directly to the merits of the rule that is being promulgated, it just has to do with an analysis of the federalism impact and the extent to which you have consulted. Frankly, if you do want it all, I don't see much grounds for challenging that since it doesn't go to the efficacy of the rule itself. Do you see what I mean? I am not sure how all that cuts, but it does seem like this is a different kind of category of rules, and it shouldn't present a major--or requirements, I should say, in promulgating the rule, and shouldn't present a major problem for us in figuring out some way to require an agency to make a good-faith effort--I mean, not to be able to say, yes, we consulted with everybody when, in fact, they didn't. I mean, there has got to be some remedy for that if something like that happened. Mr. Spotila. Well, we believe that we ought to be able to work with you on this and work something out. As I said in my testimony and as I will repeat again, we share many of the same objectives here, and I think it is a matter of how to work together to get this right. Chairman Thompson. Well, I appreciate that. Mr. Moss. Mr. Chairman, not to invite a question on this, but also not to leave any misimpression, I should tell you that I have been present during a number of the discussions with the State and local governments which I regarded as very fruitful. Chairman Thompson. How is it going? Mr. Moss. I think we have had a very positive interchange, and we are working very hard, and I think we remain hopeful that we are going to be able to reach---- Chairman Thompson. Have you decided, in trying to come up with an order that requires consultation with them, that you ought to consult with them? Mr. Moss. Yes, Mr. Chairman. Chairman Thompson. We have gotten over that hurdle. All right. Is that a vote? [Pause.] I am going to recess here just very briefly in order to go vote, and we will come right back. I am sorry. I was hoping we would be able to keep going, but it doesn't look like we are going to be able to. So we will recess hopefully just very briefly to have an opportunity to vote. [Recess.] Chairman Thompson. Let's come back to order here very briefly. Senator Roth has come in, and he has an introduction to make which will allow us to get started on our second panel. So, gentlemen, we want to thank you for being with us, and we will--I don't think we need to ask the whole second panel to come up, but you may go, if you would. Senator Roth will make an introduction to lead off our next panel. OPENING STATEMENT OF SENATOR ROTH Senator Roth. I want to thank the Chairman for his courtesy. Please come up, Governor Carper. For me it is a great pleasure to introduce a distinguished Delawarean to the Committee today. And appearing as a witness for the second panel is Tom Carper. Tom is governor of the State we all affectionately call ``the small wonder.'' Now, I have known Governor Carper for many years, and we have had the opportunity of working on many issues of great importance to our beautiful State. Tom has a very distinguished background. He served as Delaware's State treasurer from 1977 to 1983. In 1983, he came to Washington as a Congressman and spent almost a decade in that office before assuming the governorship in 1993. Currently, the governor serves as chairman of the National Governors' Association, and his background as well as his responsibilities in this new role gives him a unique insight into the topic before our Committee today, the important issue of federalism. Like many of us here, Governor Carper understands the special role of State government and the need to keep these governments strong and vital. He is such an expert on this area that he agrees with me and supports the Federalism Accountability Act. So it is a great pleasure to welcome you here today, Governor Carper, and have you before our Committee. We look forward to working with you on this bill as it proceeds. Governor Carper. Mr. Chairman, thank you very much. I feel like this is a home game as opposed to an away game, and I am delighted to be here with you. It is great to see George Voinovich who preceded me as chair of the NGA and to see Senator Levin, whose brother I served with in the House on the House Banking Committee for a while. I just want to say to you and to others on this Committee and the Senate, Democrats and Republicans alike, who have sponsored this particular bill that you are holding a hearing on, many thanks, many thanks. I would ask permission, Mr. Chairman, if the full text of my statement might be entered into the record, and I would just like to summarize it if I could. Senator Roth. That will be fine. We will have to recess because we do have a vote on the floor. And so I am going to recess and go back, and the Chairman will return in just a few minutes. Governor Carper. That will give me time to rewrite my testimony. [Laughter.] Senator Roth. Again, we welcome you here. Governor Carper. Thanks. You are good to be here. I appreciate it, sir. Senator Roth. The Committee is in recess. [Recess.] Chairman Thompson. We will reconvene and turn to our second panel. The first witness will be the Hon. Thomas Carper, governor of Delaware, the chairman of the National Governors' Association, who has been introduced. He will be followed by the Hon. John Dorso, Majority Leader of North Dakota House of Representatives, who is testifying on behalf of the National Conference of State Legislatures. Majority Leader Dorso testified before our Committee in May on the federalization of crime, and we are pleased to have him again with us. The final witness on this panel will be the Hon. Alexander Fekete, who is the Mayor of Pembroke Pines, Florida, who is testifying on behalf of the National League of Cities. Governor, I know you have to leave soon, so I thank you for being with us today, and we would be pleased to hear any statement you have to make. TESTIMONY OF HON. THOMAS R. CARPER,\1\ GOVERNOR, STATE OF DELAWARE, AND CHAIRMAN, NATIONAL GOVERNORS' ASSOCIATION Governor Carper. Mr. Chairman, thanks very much. Could I ask that my printed statement be entered into the record? --------------------------------------------------------------------------- \1\ The prepared statement of Governor Carper appears in the Appendix on page 306. --------------------------------------------------------------------------- Chairman Thompson. It will be made part of the record. Governor Carper. Thanks very much. Thank you for inviting us to come and letting us be here. This is sort of the second bite out of the apple that the governors have had. Mike Leavitt of Utah was here I think earlier in the year and testified, and we appreciate the second chance. It is just great to be with Senator Voinovich. It is hard to call him Senator. He still thinks like a governor, and we are delighted that he is here. It is great to be with you. Sometime during my testimony you will hear me speaking, but you will see his lips moving. [Laughter.] It has been that way for a while, hasn't it, George? Senator Voinovich. Governor, I would like to say thank you for being here today, and I just want to say that there are some wonderful things that have happened in this session of the U.S. Congress because of the wonderful relationships that your organization and the other organizations and the Big 7 have developed with the leadership here in the Senate and in the House. Hopefully, we will keep following through with this legislation. Governor Carper. I hope so. I just want to say particularly to you, but to others as well, education flexibility, and your colleague from Tennessee, Bill Frist, was very good in that, tobacco recoupment, all kinds of issues, thank you very much for what you are doing. I was sitting in the audience when some of the discussion from the last panel got off on the Executive Order that the administration has been working on. Senator Voinovich was then a governor. In fact, we were, I think, in Milwaukee getting ready for a governors meeting when the word came out that the administration was about to issue a new Federal Executive Order on federalism. We got on the phone and called the folks back here in the administration, asked them to back off--he says you haven't consulted with us at all, not the governors organization or any other organization to our knowledge, and we just asked them to back off and give us a chance to sort of revisit the issue. And they have been good about doing that, and we have had a real long conversation. And I think for the most part we have narrowed and eliminated our differences. There is still a difference on a key issue, and that is, I think, the 4(b) preemption. But other than that, I think they have met us halfway, and I am well pleased. I am pleased to have a chance to come before you today, and I just want to sort of summarize my testimony for about the next 45 minutes. [Laughter.] Not really. Chairman Thompson. We are used to that. Governor Carper. When you had Mike Leavitt here, you had the governor who knows about this stuff. You got me, and I have learned from him and from George Voinovich. I would like to share with you a couple points. First, is thank you for being our partner. Thank you for regarding us as a full partner, and we are real supportive of this legislation, as you know, and are delighted to see it has bipartisan support. We hope you can come up with something that the President can sign and that we can all benefit from. If you look at the last decade, most recently education flexibility legislation, what you did on unfunded mandates, what you have done on child care, what you have done on welfare reform and some other areas, you have actually sort of devolved power back to the States. We think that is good, putting the power closer to the people and trying to hold us accountable, and that is the way it ought to be. While devolution has sort of occupied center stage during the last couple of years, another story has unfolded with a little less fanfare, and that is preemption of State and local laws. Sometimes we focus on the administration doing the preempting, but the Congress preempts, too. I used to be a Congressman, was for 10 years. I did my share of preempting. And, in fact, one of my primary antagonists was Senator Levin's brother, Sandy, and we did war on the House Banking Committee. I was trying to preempt some State laws. We were trying to work on--the issue of how long it takes you to get access to your money, your checking accounts, after you deposit a check? We call it clearing times, and I was trying to preempt some State laws. Sandy was trying to stop that or slow it down. In the end, we preempted and I think we came up with a good national policy. So I sit before you today as one who has done a little preempting, but who sits as governor---- Chairman Thompson. A reformed sinner. [Laughter.] Governor Carper. Reformed, that is right. What is it? Hate the sin, love the sinner. But there are times when it is appropriate to preempt, and I think what you are trying to do here is to say if there is a Federal law that we pass and if you got a State law over here that is inconsistent, before the Federal law preempts the State law, you have got to say here in Congress we mean to preempt you. And if you don't and we end up in court, then we sort of say to the courts, in that case you cede to the States. You basically yield to the States. And that is pretty much the way we think it ought to work. Federal preemption of State laws has occurred as a result of not any kind of malicious desire on the part of anybody here in this body or across the Capitol to undermine State sovereignty. There is sometimes the unintended byproduct of other issues, and, unfortunately, that can be the same for States regardless of whether the motives are good or bad. Sometimes we have ended up with State and local authority decision-making reduced. We have seen a little bit of centralization of power here in Washington. Maybe more than is in the interest of our country. As I said earlier, it is not just the agencies that preempt, but the Congress does as well. I just learned this in preparing for my testimony. There is a service in the congressional legislative website. It is called Thomas. That is provided, and some of our folks looked it over to see if we could find the preemption in the titles of any bills that are coming before Congress. I am told it came up with 115, which is pretty impressive, 115. I don't know where they came up with the name Thomas. Chairman Thompson. Just 1 day's work sometimes. [Laughter.] Governor Carper. I would like to sit here before you today and say I think this situation is going to get better with respect to preemption. My guess is as we go forward and have more international competition and folks are trying to respond quickly to technological developments and people are trying to maximize opportunities that are created by deregulation and businesses seek to streamline legal and regulatory requirements, my guess is we might end up with greater problems with preemption. And I can understand businesses not wanting to contend with a whole myriad of State and local codes with our statutes and our rules that prevent them from being able to respond effectively to changes in the marketplace. However, just as Federal laws and oversight serve important purposes that include preventing monopolies, raising revenues, and also financing Social Security, we think the State and local laws fulfill a variety of critical functions, too. State and local taxing authorities provide funds. You know this as well as I do. We do it for education. We do it for the roads that you help us to build, for law enforcement, for health care, and for environmental protection, too. State banking, insurance, and security laws impose capital adequacy requirements and underwriting standards, licensing procedures that safeguard consumer deposits and investments and protect against fraud and against abuse. We have State utility regulators that are trying to ensure our citizens get high-quality water and electric and sewage and telephone service and they get it at reasonable prices. The important role of State laws and our regulatory responsibilities shouldn't be forgotten in the midst as we scramble to accommodate businesses and react to the forces of globalization, the forces of technology, and the forces of deregulation. Our States and our citizens, people you represent, too, stand to benefit as much as businesses from the changes that are being made, but not at the cost of continuing Federal preemption of State laws. I want to thank you for the work that has been done on unfunded mandates, and I know that was done by a previous Congress, previous leadership of the NGA, but we are grateful for it. The legislation we are discussing here today is actually pretty similar to the unfunded mandates legislation that was enacted about 4 years ago. That legislation has been successful because it provides better information and analysis about unintended consequences of Federal action before they happen. I will say that again: Before they happen instead of after they happen. And your preemption bill is not dissimilar to that. It focuses on, as I understand it, providing information and ensuring consultation prior to action by either the Congress or by any Federal agency taking action with federalism implications. I am happy to tell you today NGA supports your bill, S. 1214, Mr. Chairman. We urge you to schedule markup as soon as possible, maybe after this testimony is over today, maybe later this week, or maybe next month. But we would like for you to-- we would encourage you to move forward with all due diligence. There are a couple of changes we would like for you to think about making to the bill, and let me just mention them briefly. First of all, I think in Section 5 the analysis required in Committee or conference reports you might want to consider expanding that a bit. We think it is important for Federal officials to understand the effects of legislative and regulatory preemptions on costs, on economic development, on consumer protection, and State and local enforcement authorities. We would ask you to keep that in mind with respect to Section 5. Additionally, I think you have got a point of order. I think the unfunded mandates law includes a point of order. I don't believe this bill does, and you may want to consider amending this bill to provide for a point of order, and I would ask you to keep that in mind. The other point, I think this deals with Section 6(b), and the rules of construction would apply to all rules promulgated after enactment of this legislation. Let me try to get this straight. I think the way the bill is written it says that you would affect Federal rules promulgated pursuant to legislation enacted previously. So that is a rule or regulation promulgated after the passage of this bill where it could be promulgated with respect to legislation that was previously adopted. And what we would encourage you to consider is amending that subsection so that the rules of construction apply only to Federal rules promulgated pursuant to legislation enacted after S. 1214. In conclusion, let me just say that the legislation I worked on down here was never perfect. I don't know that this is either. It is good. I don't know that you are going to be finished or we are going to be finished on this front. But I just want to encourage you to continue your efforts and to expand your good work to this threat to federalism, and that is preemption. We want to urge you to join us as States and as governors in a working partnership involving all of America in our system of government through all of its elected officials, whether we are in State houses or here on Capitol Hill. And I think that we can best meet the needs of the folks that we are all elected to serve if we meet the collective needs of the people and we pull together as you tried to do here in this partnership. Again, it is a good bill, and we have got a couple points we would like for you to keep in mind as you go forward. We would like to urge you to mark it up and send this baby over to the House of Representatives. Thank you very much. Chairman Thompson. Thank you very much, governor. I really appreciate the leadership that you have shown in this area, and it is something that is kind of misunderstood by a lot of people. It has to do with--the benefits of moving in this direction, and we have had a lot of activity in terms of devolution, are first of all it is consistent with sound constitutional principles, and there is a reason that it is set up that way in the Constitution, because what we are talking about is power and the distribution of power. And we all know what the Founding Fathers thought about that and how important it was. There seems to be a tendency in democratic societies to centralize as time goes on, and we are trying to fight against that not only for constitutional reasons and for distribution of power reasons, which is important in a democratic society, but for very practical reasons. And governors such as yourself who have come up recently with such innovative ideas, so much of the good things that are happening in this country are going on at that level, and we have learned that not all the good ideas come from up here, and that we ought to be very careful in preempting these fields. As far as this bill is concerned, I appreciate your suggestions. I would like a point of order, too. Frankly, there may be some practical difficulties in getting that done. Maybe we can work together and maybe you can help us get that done. Governor Carper. Be happy to try. Chairman Thompson. I think that would be a good idea. I think in terms of the other point, the bill does have to do with statutes that have already been previously passed, and I must say that there undoubtedly, of course, will be additional rules, many, many rules coming down that have to do--that are done pursuant to statutes that have already been passed. But it is not meant to preempt those statutes that have already been passed. The bill says that preemption can be authorized by the statute, and if courts have previously determined, for example, that a statute preempts certain areas, I think that would be incorporated in the rule. In other words, I am a little bit concerned about the wording of this and making sure it was clear enough as to what we were trying to do, and I think it needs a little work, perhaps. But we want it to apply to old statutes, but we are not trying to rewrite or preempt all the old statutes, if you know what I mean. So we are on the same track there, I think, and we will continue to work on that. Thank you very much. Senator Voinovich. Senator Voinovich. I am pleased that we included in this legislation a problem we had, and that is the issue of Medicaid caps, whether they are unfunded mandates, and the issue of whether or not, if you have some of the changes in administrative costs, whether or not that is an unfunded mandate. Mr. Chairman, that is real important because it is a follow-through---- Chairman Thompson. You were on to us about that before you ever got here. I remember. Senator Voinovich. Right. The other thing is that on the record I would like your comment about the fact that under the unfunded mandates relief legislation there was to be agency review of impact on regulations. I would be interested in your opinion on whether or not that has happened or not, just for the record. Governor Carper. I wish I could tell--I think there has been, but, Senator, I could not tell you for sure. Senator Voinovich. Well, one of the things was that they were supposed to be looking at the regs, and from my experience that has been pretty well ignored in terms of---- Governor Carper. By some it has been, by others not. It has been uneven. Senator Voinovich. The other is the question of judicial review in terms of federalism impact statements. How important do you think that is? Governor Carper. In a perfect world, I think it is desirable. I don't know if you can get it done. And as you go forward, I would--what is the old adage? Don't let the perfect be the enemy of the good. If you can get it done, fine. If you can't, then get what you can. Senator Voinovich. In terms of the suggestions that were made by representatives of the administration today, I would be very interested to have your response to some of those suggestions. We certainly want to make sure that once this legislation is marked up that we have a good chance of having the President sign it. I think that where you feel they may have made some good suggestions that you feel comfortable with that are not inconsistent with what we are trying to accomplish here, I would sure like to hear about them. Governor Carper. Good, and we would welcome the opportunity to submit something in writing. I was in and out of the room while they testified. We will have some really smart people who heard the whole thing and who know this stuff backwards and forwards to help us prepare something that would be helpful. Chairman Thompson. Thank you very much, Senator. Governor, I know you have other obligations. Thanks again for being here with us. We look forward to working with you. Governor Carper. Thanks very much. Let me just say again to Senator Voinovich, if you had something to do, Senator, with getting that Medicaid cap--the language included on the appropriations bills--the entitlement programs, rather, that you alluded to earlier, thank you. That is much appreciated. Senator Voinovich. He heard us. Chairman Thompson. I can attest to the fact that you beat up Senator Glenn and me both over that. Governor Carper. Good work. And, Senator, I look forward to being in your State. Your governor, Governor Sundquist, is going to be hosting the Nation's governors and a bunch of people at a technology conference, education technology conference, in about a week. Chairman Thompson. Great. Governor Carper. We want to get, naturally, and learn as much as we can from Tennessee. Chairman Thompson. There is a lot to be learned down there. Governor Carper. Most of us governors learned what we know from George Voinovich. [Laughter.] Chairman Thompson. Thank you very much. We appreciate your being with us. Mr. Dorso and Mr. Fekete, we appreciate your forbearance, and, Mr. Dorso, thank you again for coming back. You are getting to be a regular customer to this Committee, and we appreciate the work you are doing in this area. Would you make your statement, please? TESTIMONY OF HON. JOHN M. DORSO,\1\ MAJORITY LEADER, NORTH DAKOTA HOUSE OF REPRESENTATIVES, ON BEHALF OF THE NATIONAL CONFERENCE OF STATE LEGISLATURES Mr. Dorso. Good afternoon, Senator Thompson. I guess I will skip through all of the majority leader stuff and just say, as the governor said, the staff of NCSL and I have put together written testimony which I think is very good, and I encourage you and the Members to read it. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Dorso appears in the Appendix on page 324. --------------------------------------------------------------------------- Chairman Thompson. We will make the full statement a part of the record. Mr. Dorso. OK. As I listened to the proceedings here today, it is fairly obvious that you--and I have heard you in some of the presentations that you have made--understand the problem. The problem obviously is the increasing frequency of preemption, not only by Congress but by agencies of government. And, certainly I guess we all understand that the Supremacy Clause is there, and if you have a will to do that, certainly you can. I don't have a problem with that, and as you have said, if that is your intention, let us know what your intention is as you debate whatever your bill is in front of you that contains that type of activity. I mean, we will all be part of the debate at that time as to whether, in fact, that is exactly what you intend to do. So I really don't have a problem with preemption from the standpoint as you have pointed out. If we all know that that is what is going to happen, then we should all understand it and what it really means. Certainly I think that we as States from the other standpoint think that we do a good job in what we do, and we don't like preemption any more than it has to be. We understand that sometimes it has to be. But I think that we all understand that States are probably the basis of a democracy. It is part of the Constitution, a cornerstone of the Constitution, that we keep government as close to the people as possible, and certainly the States are there. I have a number of instances in my testimony where I talk about instances where Congress has preempted States and it is causing big problems for us. One of them is the Internet Tax Freedom Act. North Dakota is one of those States that did pass a tax on Internet providers, and Congress did its will on that, and we are fighting through that problem. Obviously, the whole problem about the Internet gets to be sales tax revenues, and I know State Senator Finan, Senator Voinovich--we are good friends, and we have talked considerably about what a terrible problem it is for Ohio. Obviously, Ohio has much bigger sales tax numbers to deal with, but in North Dakota, it is a big problem for us, too, and for the political subdivisions. And it would be unconscionable for Congress to take our right to sales tax away. Chairman Thompson. You can imagine what it is like for a State that doesn't have an income tax. Mr. Dorso. Well, yes, sir, I understand that. Chairman Thompson. Which is Tennessee. Mr. Dorso. And it is not only that we have got the State tax problem, but I have retailers in my home town of Fargo, North Dakota, that are going to be put in a terrible position competing against Internet sales and sales taxes is 7, or 8 percent, some of them going to the local subdivision, some of it to the State. I mean, it is just a bad situation, and I think we have got to work through that. Now, that may take working together, I hope, States and Congress, to do that, but the Tax Freedom Act I think was a bad way to start, and obviously we have talked about the fact that that committee was put together, and we didn't like the way that was done very well either. But, the Y2K liability bill, we have talked about that particular problem. I would like to talk a little bit about electric deregulation. I mean, that is a subject that comes up in Congress on a regular basis. I have a friend of mine, Chase Hibberd, who is the chairman of the tax committee in Montana, and we converse on a regular basis, sometimes about hunting dates, but we were just talking the other day about Montana has gone much more quickly than North Dakota as far as electric industry deregulation and a redo of their tax structure. Well, we haven't moved as fast, but one of the reasons that I have not wanted--and we have an interim committee studying it. We really want to watch what Iowa and Montana, some of our neighboring States are doing to see if they have done it right before we get too far down the road and have to fix it. Now, of course, on the other side of it, I think we can fix it faster than you could fix it here, because we seem to be able to move quicker on those types of issues. So I think that we as States can react to some of these things faster, and I think we can do it in an inventive kind of way. And we don't have a one-size-fits-all situation. Obviously, the Montana structure, as far as their electric industry, is completely different--well, not completely, but somewhat different than North Dakota's. We are going to have to approach things a little bit different than they. And on so many issues, that is the way it is, and I am sure you are aware of that. Chairman Thompson. You mentioned Y2K. Could you state your concern there a little bit more? Mr. Dorso. Well, Mr. Chairman, we in North Dakota--I will give it to you from the North Dakota perspective. We had a number of Y2K bills introduced in the last legislative session. We chose to defeat those bills that were introduced, the industry people one, other people different versions. We decided that this was an issue left to the courts, that it was only going to be something that lasted through the year 2000, maybe a couple years thereafter, and we didn't need a law to deal with Y2K liability that would be sitting there on the books for the next century waiting for another turn of the clock. So we don't perceive that we are going to have a big problem with it in North Dakota, and we really didn't think when we saw what Congress was doing that it was necessary to have, again, a one-size-fits-all thing. Chairman Thompson. I appreciate that. Mr. Dorso. As I said, I am going to try and move through this fairly quickly in case you have got some questions. You have already talked about the fact that this is increasing five times. I want to point out another example that I just came across because, being the chairman of the Law and Justice Committee at NCSL, we were dealing with some Native American issues. And the Department of Interior was proposing a rule on trust lands, and the staff at NCSL sent that to me, and I started reading it, and when I got to it, I just got livid because in it it says, ``They acknowledge the local tax base may be affected, but the refusal to comply with the Executive Orders is based on a totally unsupported statement that because the loss of revenue is minimal.'' Well, I can tell you, in North Dakota, where we have a number of reservations, that that is just absolutely malarkey. And if that is the way that these agencies just go around and put you in a pen by just making statements like that--and, also, I called NCSL, and I said write them a letter and say that is absolutely a gross misrepresentation of where we are at. I mean, they either don't acknowledge it at all, or if they do acknowledge it, they put something like that in it. Chairman Thompson. That doesn't necessarily answer the federalism issue, anyway. I mean, one part of it. Mr. Dorso. But, agencies propose rules all the time that affect us, either fiscally and/or legally. The DOJ on the ADA thing, I mean, I think ADA is fine, there are a lot of great things about it, but when you get to mental health issues and community health care, we have got a lot of issues to work through with that. And they just write a rule that is supposed to fit everything. Well, I can tell you, what fits Baltimore doesn't fit Williston, North Dakota, when you get to that issue. But they seem to think it is, and they just send it out, and we are supposed to all of a sudden comply. If we don't comply, there is reason for somebody to bring a lawsuit against the State. And there is no way for us---- Chairman Thompson. But not against them. Mr. Dorso. No, they don't sue the Department of Justice. They sue us. So then I have got the Attorney General calling me and saying what are you going to do about it, and that is just another instance that's in here. Like I say, in conclusion, Mr. Chairman, I know that you have been active in this, and I know Senator Voinovich from his days as governor has been active in this. I was in Ohio when we originally started talking about this, what, 4 or 5 years ago, Senator? Mr. Chairman, I will tell you I feel so strongly about this I got up at 4 o'clock this morning to come down here. I am going home tonight. But I feel this is a cornerstone of our democracy, and I know that you believe that and Senator Voinovich believes it. We are totally in support of what you are doing here. If we can be helpful in this regard, I know this is not probably the final product, and it has to work its way through. I certainly think there has to be some safeguards built into it. I heard the judicial review question. I am not sure that we want everybody to sue every agency if they do not like it. But, still, if we do not have some kind of judicial review, at least reserved to maybe the State and some political subdivisions. I do not know what it will mean if it is not in there because, as you have pointed out, the agencies do not seem to care anyway. At this point, an Executive Order does not do anything. So I think the point of order question, I do not understand that. That is not the way we operate in the legislature in North Dakota. You have to be the judge of whether that is important to you, whether it could be an effective tool or not. I do not know. But if it is effective, and you can get it, as was said by the governor, I guess that is something that you will have to weigh out. I think the most important part of this is is that you are making the effort to get this done. And just the dialogue of making that effort is important. But passage of it would be great. I think it is something we can build upon. I think there is an experience curve here that would be great for the States, and I certainly want to congratulate you and the co-sponsors for your efforts in this regard. Chairman Thompson. Thank you very much. We really appreciate your taking the trouble to come down here. Mayor Fekete. TESTIMONY OF ALEXANDER G. FEKETE,\1\ MAYOR, PEMBROKE PINES, FLORIDA, ON BEHALF OF THE NATIONAL LEAGUE OF CITIES Mayor Fekete. Thank you, Mr. Chairman. Good afternoon. And, Senator Voinovich, my name, as you stated, is Alex Fekete. I tell people it rhymes with spaghetti. --------------------------------------------------------------------------- \1\ The prepared statement of Mayor Fekete appears in the Appendix on page 340. --------------------------------------------------------------------------- Not only am I mayor of Pembroke Pines, but I am also the vice chairman of the Finance Administration and Intergovernmental Relations Committee of the National League of Cities. I am pleased to be here this afternoon to testify before you with my colleagues on what we believe is ground- breaking Federal legislation, the Federalism Accountability Act of 1999, S. 1214. This bill embraces and preserves the Chair's principle of federalism and promotes a new Federal-State-local partnership with respect to the implementation of certain programs. I thank the Committee for having this hearing today. I would also especially like to thank the Chairman, Senator Thompson, and his colleague, Senator Levin, for their leadership, and Senator Voinovich, for working with the members of the ``Big Seven'' State and local government organizations to craft this bill. At the same time, I would like to recognize and thank the bill's cosponsors for their leadership, which will help pass this legislation. The National League of Cities is the oldest and largest organization representing the Nation's cities, towns and their elected officials. NLC represents 135,000 mayors and council members from municipalities across the country. Whatever their size, all cities are facing significant Federal preemption threats to historic and traditional local fiscal, land use and zoning authority. Whatever their size, all cities and all Americans will benefit from legislation such as S. 1214. S. 1214 is important legislation because it permits cities to govern for the benefit of all of their residents. To illustrate the need for this legislation, I want to bring to the Committee's attention a recent article in the Washington Post, which reports on a poll taken by Peter Hart and Robert Teeter. The poll results shows a general alienation of the people from their government. According to this poll, 54 percent of American people do not feel that they have a government body that is envisioned by President Clinton and his ``of, by and for the people.'' People today tend to think of government as the government not our government. We need to work together to change this perspective, and S. 1214 is the best and most definitive way to do that. The Washington Post article, additionally, notes that people feel more connected to their State and local governments than the Federal Government. S. 1214 would help connect Congress with the success of State and local governments by checking preemption by a Federal Government the citizens feel distant from. At the same time, S. 1214 is a springboard to a government that is ultimately more responsive to the people because it creates the partnership between all levels of government, Federal, State and local. The pervasive and imminent threat of preemption by the Federal Government and the low level of participation by local government in creation of Federal laws and rules, which impact them mostly, is why S. 1214 is needed. Let me clarify that it is not the intent of NLC to undermine the supremacy clause of the Constitution. In fact, I think everyone in the room today acknowledges that there are times when Federal law should trump State law--when there is a direct conflict between Federal and State law or when it is Congress's express intent to preempt State law. During the 1960's, for example, the Nation needed the Federal Government to move forward with civil rights legislation that would ensure the equal treatment of all Americans under our Constitution. The problem, however, is not with our dual form of government, as it was established by the Framers of the Constitution, our concern is focused on the frequency of Federal preemption of State and local laws. Moreover, there seems to be a lack of sensitivity on the part of Federal Government with regard to local government and a preemptive impact of Federal legislation and regulations on local government. It is the National League of Cities' highest priority to put a meaningful check on this preemptive of State and local authority. Allow me to cite a few actions the Federal legislation has taken just in the last few months. First and foremost, recent legislation signed into law last October impedes States' and local governments' ability to tax sales and services over the Internet in the same manner as all other sales and services are taxed, despite the fact that no such limitation would apply to the Federal Government. There is also legislation being voted on today by the House of Representatives called the Religious Liberty Protection Act of 1999, which is a massive preemption of State and local zoning and land use laws. This bill, if enacted into law, would chill a city's ability to uniformly apply neutral zoning laws to an entire community by exempting religious-based land use like churches, synagogues and mosques. Local zoning and land use laws also face severe preemption in the area of takings law, with the reintroduction of takings legislation in the House and the Senate, which would allow developers to pursue takings claims in Federal court without first exhausting their State judicial procedures. Current law preempts municipal authority over the siting of group homes and preempts a municipality from applying zoning, environmental, health and safety standards to railroads. There is no question that the most significant impacts of these preemptions will be felt at home in our Nation's cities and towns through the erosion of local tax bases and through the inability to enforce local ordinances enacted for the benefit of all who live in our community. The time to revitalize our federalist form of government is now. The Supreme Court has spoken of the need to recognize that freedom in this country is embodied in the creation of two governments, Federal and State, and that State and local governments are joint participants with the Federal Government in our Federal system. Members of the Committee, sometimes a more regional or local approach to governing is needed, and sometimes the needs of the people are better met at local level through the enactment, application and preservation of local laws. The Federalism Accountability Act would help to restore some balance between Federal, State and local governments. Let me turn to S. 1214. This bill provides cities nationwide with a viable means of alleviating many of the problems associated with Federal preemption of local laws. S. 1214 represents one of the most important efforts to fundamentally rethink the nature and relationship of our Federal system and to expand the partnership of elected government officials. S. 1214 contains several good tools for creating this new idea of federalism, which are beneficial to cities. Section 4 of the bill defines a public official as including the representative organization of State and local elected officials, those being the national associations of the Big Seven, State and local government organizations. This inclusion is vital to providing cohesiveness to the consultation provision of the bill. It will make it easier to get State and local input from these national associations who can best represent the views of a cross section of their respective membership. It streamlines and simplifies the consultation process for all involved. Section 5 of the bill requires Senate and House Committees, including Conference Committees, to include a statement with each Committee or conference report on a bill or joint resolution that details the preemptive impact of the legislation, gives the reasons for this preemption and explains how State or local authority will be maintained following the passage of legislation. Where there is no Committee or conference report, there must be a written statement by the Committee or conference that details the level of preemption. This section is critical to local governments. So often it is the case that a bill passed has severe consequences on our Nation's cities because it preempts State and local law. One such example is the Internet Tax Freedom Act of 1998. Without a Committee or conference report or statement to explain the preemption and the reasons behind it, it is impossible for local governments to know whether such impacts were even considered by Congress. Under this section of the act, local government is assured of such deliberation. Another very positive and important aspect of this bill is contained in the Rules of Construction. It clarifies instances of Federal preemption by requiring that the intent to preempt be expressly stated in the statute or rule or permitting preemption when there is a direct conflict between a Federal, State and a statute of local law. This section should not be interpreted as a prohibition. To the contrary, this bill recognizes that at times preemption is appropriate. What this section attempts to do, however, is minimize instances where the intent to preempt is not clear, thus avoiding expensive and adversarial litigation by limiting a court's ability to find that an implied preemption exists. It, again, makes the Federal Government accountable for what it does, as you stated, Mr. Thompson. This section also creates a presumption against preemption of State and local law and permits cities to govern by requiring that any ambiguity in the act be construed towards preserving State and local authority. These rules of construction, therefore, are of vital importance to cities. Section 7 of the bill spells out several important requirements to ensure that State and local public officials participate in the Federal agencies' rulemaking process in an early and meaningful way. This section directs the heads of Federal agencies who are responsible for implementing this act to appoint a federalism officer within each agency. The officer would execute the provisions of this act and serve as a liaison to State and local officials and their representatives, thereby providing cities with a definable person who is a point of contact in the rulemaking process. Section 7 additionally requires that agency heads give notice to and consult with State and local elected officials and their representative national organizations early in the rulemaking process and prior to publication of a Notice of Proposed Rulemaking when that rule might interfere with or intrude upon historic and traditional rights and responsibilities of State and local governments. This provision of the bill requires Federal agencies to stop, look, listen and think before they leap into the arena of preemption. It further provides cities with a much-needed voice in their rulemaking process especially when those rules would have a direct and potentially debilitating impact on our Nation's cities. Most importantly, it is an opportunity for local elected officials to work more closely with Federal agencies earlier in the rulemaking process. This section of the bill furthermore calls for a federalism assessment to accompany each proposed, interim final, and final rule in the Federal Register and each rule review submitted to the Office of Management and Budget, when those rules could affect State and local authority. The federalism assessment would detail, analyze and attempt to justify the extent of the preemption of State or local authority. The assessment would describe the extent to which State or local authority would be preserved after the rule's enactment. It would additionally communicate the agency's efforts to minimize the impact on State and local governments and to consult with public officials, including the concerns of those officials and the extent to which those concerns have been satisfied. Agency heads would have to consider these assessments when promulgating, implementing and interpreting the relevant rules. Last, but certainly not least, Section 9 of the bill provides cities with an overall check on the Federal Government's preemption activities. It requires the Director of the Office of Management and Budget to submit to the director of the Congressional Budget Office information describing each provision of interim final rules and final rules issued during the preceding calendar years that preempts State and local government authority. CBO must then submit to the Congress a report on preemption through Federal statutes, rules or court decisions and legislation reported out of Committee during the previous year of the Congress. Again, this extra check will help all levels of government track Federal activities dealing with preemption and provides information to local governments on the critical issues. The above provisions taken together provide for a greater accountability of our Federal Government. They provide for the opportunity for increased input for most directly affected by rule or statute, and they provide the opportunity for a more meaningful and balanced federalism. Thank you, Mr. Chairman and Mr. Voinovich, for allowing me to make the statement. Chairman Thompson. Thank you very much. Senator Voinovich. Senator Voinovich. I have no questions. I think you have done a beautiful job of laying it out, both of you. And I could not help but think, Mr. Chairman, that we are now considering a bill this week, Patient Protection Plus, that has great implications in terms of federalism and preemption. Several weeks ago, we had another piece of legislation that the Chairman and I spent a lot of time talking about, a need that was the Juvenile Justice bill, and its implication in terms of a preemption. And there is no question that this is a topic that is very, very important to the future of this country and also to the relationship that we have with our partners in State and local government. So I just want to say thank you very much for being here. Mayor Fekete. Mr. Chairman, may I request that my testimony be part of the written record? Chairman Thompson. The full statement will be made a part of the record. Thank you very much. Mayor Fekete. Thank you, sir. Chairman Thompson. Senator, your point is really well made. The so-called Patients Bill of Rights on the floor would basically federalize all of the State laws or supersede all of the State laws that now have to do with HMOs. We have gone to managed care now. Costs were absolutely out of hand, and we had to do something. We went to managed care, and there are a lot of things that we are trying to work out. But the fact that we are trying to work out the details means that we need for States to have the opportunity in the non-ERISA plans, to do what they feel like they need to do. And Tennessee, North Dakota, and Ohio might have different approaches, and some will work better than others. And we can do what you are doing on the Y2K thing, look and see what is working and what is not working, and what drives up costs, and what are the unintended consequences of what we do. But we face it every day on something--federalizing crimes we have had. Before Senator Voinovich got here, once in a while we would have a 99 to 1 vote because it would be--we federalized you cannot bring lawsuits against Good Samaritans or something. Well, that is a perfectly noble thing, but there are State laws already on the books on that. And you look at the States on a particular issue, and if some of the States have passed a law about it and some have not, the argument up here is that, well, we need uniformity. And then if you look at another issue and all of the States have passed a law on it, they say, well, what is the harm in federalizing it? We have already got the laws that say we need it. So it is a constant problem, and we really need the National Conference of State Legislators and the National League of Cities to weigh in on these things because you have a voice, you have clout, people listen to you, and I cannot overemphasize how important it is for you all to stay on the job and help us when these things get to the floor and when we bring them up to get them out of Committee and so forth to really weigh in because people do listen to what you have to say on these issues. And I want to thank you again. I know you have been inconvenienced greatly, but it is a very worthwhile cause, as you have well stated. So thank you very much for being with us. Mayor Fekete. Thank you very much. Chairman Thompson. Let us ask Ernest Gellhorn, professor of law, George Mason University, and Caleb Nelson, associate professor of law, University of Virginia, and Rena Steinzor, associate professor of law, University of Maryland. Ladies and gentlemen, we apologize for the lateness of the hour. It could not be avoided today, but we really appreciate your bearing with us. Mr. Gellhorn, would you like to proceed? Your full statements will be made part of the record. You have heard, I think most of you have heard what has been going on here today. And any comments or points that you feel like are especially noteworthy to be made from all of this, feel free to summarize those for us. TESTIMONY OF ERNEST GELLHORN,\1\ PROFESSOR OF LAW, GEORGE MASON UNIVERSITY Mr. Gellhorn. Thank you for the opportunity of appearing before you. I will focus my remarks, Mr. Chairman, on Section 7 of the bill, which relates to how agencies would implement it. The bill really has two components. One is the Federal preemption component, which I am not addressing, and the second focuses more on federalism assessment, which I will discuss. What is the impact of the proposed rule on States and local governments? This is an important topic because the estimate of the impact of Federal regulations on State and local economies exceeds half a trillion dollars a year. So we are talking about something that is not only important in terms of its impact, but also is basically common-sense legislation. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Gellhorn appears in the Appendix on page 355. --------------------------------------------------------------------------- S. 1214 covers three things: First, before an agency adopts a rule, the bill requires that the agency talk to the local and State Government and local individuals who will be affected by the rule and get their input. Second, S. 1214 also requires that before a rule is adopted the agency must make an assessment of the local effects. Third, the agency must explain how it has taken the assessment into account. The results should be more rational rules that are consistent rules with the legislative intent. Now, the alternative proposed by the administration of adopting an Executive Order is not meaningful. We have already seen that the existing Executive Order has not really been followed so something more is required. In addition, there is another problem, and that is the Executive Order does not apply to independent agencies because of a concern expressed, apparently, by the President as to whether or not orders can reach the independent agencies. I happen to think they can, but they have not chosen to do so. So under the Executive Order alternative, a significant area of its potential regulation would not be reached by the federalism requirement. The issue that I would call to your attention, where I think additional effort should be given, is to the provisions for judicial review. There is not any in the bill, and as a consequence, the Administrative Procedure Act's judicial review standards would apply. If an agency does not follow all of the procedural requirements, the rule could be stricken under Section 706(2)(D) of the Administrative Procedure Act. That is, a challenge could be brought that not each aspect of the law has been followed, allowing for a challenge under 706(2)(C) of the Administrative Procedure Act. Finally, a challenge made to the agency rule as to whether or not the rule is arbitrary and capricious for a failure to comply with the assessment requirement. I believe that this broad approach to judicial review should be cut back. Instead, the judicial review provisions, such as set forth in S. 981 that was before this Committee in the last Congress or that is in the Unfunded Mandates legislation, be applied. Indeed, I think there is a parallel between those bills and acts and this bill because under S. 981, the agencies would take into account the costs and benefits of regulation and consider them. That is the very same thing here. It urges agencies to take into account the federalism aspects of every proposed rule and consider them. There is another thing I do want to emphasize, particularly because of some additional testimony that will be provided, I think this bill is neither pro-regulation or anti-regulation. What it is, it is a plea for sensible regulation. It says, ``Look before you leap.'' Take into account what the rule is likely to do. And that, it seems to me, is sensible whether you are adopting more regulations, fewer regulations, intensifying them or deregulating. Finally, I would suggest to this Committee that it is perhaps time to engage in an assessment of regulatory assessments and impacts. This is the eighth area in which either Congress or the President has said to the agencies: Analyze what you are doing. I think that many of these requirements make sense. But, of course, there is at some point, analytical paralysis. Chairman Thompson. We do enough assessments to where we come to an assessment of the assessment. Mr. Gellhorn. I think that is exactly right, Senator, and that is the way I think one ought to put it. Indeed, if you put all assesstment requirements together, you could accomplish a couple of things. One is, it seems to me, you might find out that some are not necessary. But the more important point is you would put in one place for the agencies to look at the assessments that they ought to undertake. Right now, they have eight different assessment requirements that agencies must comply with. They are all different; they have requirements that are not always clear; and the agencies aren't certain how to comply. You could have a single process for engaging a regulatory impact assessment, simplify the process, and reduce the number of laws on the books. Thank you. Chairman Thompson. Thank you very much. Professor Nelson. TESTIMONY OF CALEB E. NELSON,\1\ ASSOCIATE PROFESSOR OF LAW, UNIVERSITY OF VIRGINIA SCHOOL OF LAW Mr. Nelson. Mr. Chairman and Members of the Committee, thank you for the opportunity to speak with you today about Federal preemption of State law. My testimony will focus on the rules of construction that courts currently apply to determine the preemptive effect of Federal statutes, a subject that is relevant to Section 6 of S. 1214. I will make my remarks brief. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Nelson appears in the Appendix on page 365. --------------------------------------------------------------------------- My views on Section 6 are summarized in the written statement that I would ask to be made a part of the record. Chairman Thompson. All statements will be made part of the record. Mr. Nelson. Thank you, Mr. Chairman. Mr. Chairman, as you mentioned in your introductory remarks, the preemptive effect of any particular Federal statute is a matter of statutory interpretation. But the rules of construction that courts currently use in preemption cases risk making judges too quick to infer broad preemption clauses. Suppose that a Federal statute does not contain an express preemption clause. The statute will still have preemptive effects. It will unquestionably displace whatever State law its substantive provisions contradict. But the Supreme Court has said that, in addition, the statute will be read to preempt State law that, ``Stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.'' In effect, then, the courts read every Federal statute that does not expressly address preemption as if it implied the following preemption clause: ``No State may enact or enforce any law or policy to the extent that such law or policy stands as an obstacle to the accomplishment and execution of the full purposes and objectives behind this statute.'' Imagine what would happen if a proposed bill actually contained such a preemption clause. I suspect that many members of Congress would find the clause both too vague and too broad. First, the clause is too vague. In the absence of careful statutory specification of exactly what ``purposes and objectives'' the clause is referring to, it seems likely to lead to unpredictable results as a test for preemption. Many statutes will be the products of compromise. Members of Congress who want to pursue one set of purposes will have agreed on language that is acceptable to members of Congress who want to pursue a different set of purposes. Both sets of purposes will have shaped the statute, but they will have very different implications, quite possibly, for State law. Simply telling courts to base preemption decisions on the full purposes and objectives of Congress does not seem to provide much guidance. Second, the clause is too broad. Even if all members of Congress can agree on the full purposes and objectives behind a particular Federal statute, they may not want to displace all State law that makes achieving those purposes more difficult. As the Supreme Court itself has acknowledged in other contexts, ``no legislation pursues its purposes at all costs,'' and ``it frustrates rather than effectuates legislative intent simplistically to assume that whatever furthers the statute's primary objective must be the law.'' This is particularly true in preemption cases. Our Federal system is premised on the assumption that Congress will not pursue Federal interests to the total exclusion of State interests. One of the principal safeguards on which the Constitution relies to protect State authority is the simple fact that members of Congress come from the States. In many contexts, Congress will hesitate to pursue Federal purposes at the expense of State policies that in the judgment of the relevant State authorities serve worthwhile interests in their own right. Chairman Thompson. If we were still appointed by State legislatures, we would not have this problem. [Laughter.] Mr. Nelson. The Seventeenth Amendment may, indeed, have affected that calculus. Of course, there still is a process for State constituencies to hold members of Congress accountable, and therefore members of Congress continue to take State interests into account to a degree that I think the Court's current tests for preemption fail to recognize. I think that the Court's current rules of construction make judges too quick to infer preemption clauses--to infer preemption clauses that members of Congress might well have rejected if they had actually come before them. In recognition of this problem, S. 1214 seeks to establish new ground rules for the interpretation of Federal statutes, so that the courts are working off the same page as Congress. As I understand Section 6(a), it would tell courts not to read broad obstacle preemption clauses into new Federal statutes. When Congress enacts a statute that does not expressly address preemption, the statute would preempt all State law that is in ``direct conflict'' with it, but not State law that merely hinders the accomplishment of the full purposes and objectives behind it. Of course, if Congress wants a particular Federal statute to include an obstacle preemption clause, it is free to enact one. Congress is already familiar with such provisions. At least one Federal statute includes an express obstacle preemption clause. But Federal statutes enacted after the effective date of S. 1214 would no longer be deemed to establish such provisions by default. In the absence of a deliberate decision by Congress to preempt all State law that stands in the way of Federal purposes, courts would not try to reconstruct those purposes under the assumption that Congress wanted to pursue them at all costs. In sum, Section 6 would restrain the court's tendency to infer preemption clauses that Federal statutes do not actually establish. My written testimony discusses Section 6 in more detail. But overall, I think that the rule of construction set out in S. 1214, and particularly the rule of construction set out in Section 6(a), would be an improvement upon the rules of construction that the courts currently apply in preemption cases. I appreciate the opportunity to present these views. Thank you very much. Chairman Thompson. Thank you very much. Professor Steinzor. TESTIMONY OF RENA STEINZOR,\1\ ASSOCIATE PROFESSOR, UNIVERSITY OF MARYLAND SCHOOL OF LAW Ms. Steinzor. Mr. Chairman and Senator Voinovich, I appreciate the opportunity to testify before you today. I feel a little bit like the skunk at the picnic because I think I am the only witness who has some serious doubts about the wisdom of this bill. So taking my courage in hand, I will forge on ahead. --------------------------------------------------------------------------- \1\ The prepared statement of Ms. Steinzor appears in the Appendix on page 381. --------------------------------------------------------------------------- Just as State and local governments tell you that one-size- fits-all regulation does not work for them, I suggest to you that one-size-fits-all devolution is not a solution here. I was listening earlier to the other panel that was talking about the concerns that prompted this legislation, and it seems that certain tax policies having to do with the Internet that are upsetting people and that I am certainly not qualified to comment on. You also mentioned two additional examples of legislation that were on the floor of the Senate recently. Because I teach environmental law I am here to focus on health and safety regulation. I want to give you an example of a legislative approach that worked very well and suggest to you that it would be, in the long run, a more productive way for you to go about getting the Federal Government in check, making it listen to State and local governments and come up with a balanced compromise. That example is the Safe Drinking Water Act amendments that you passed 2 years ago. To State and local governments, environmental laws were the major complaint they had. I did a study of the debate on the floor on Unfunded Mandates Reform Act. EPA was clearly the unacknowledged poster child of that debate, and two-thirds of the complaints, roughly, were about statutes like the Safe Drinking Water Act and the Clean Water Act. In response to these complaints, you got about the hard business of sitting down, rewriting that law, having everyone come up and talk to you about it, factoring everybody's concerns into the democratic process, and you came out with a new law just 2 years ago that EPA is now in the process of implementing. That law will address, as best as our democratic process can address, the concerns of State and local governments. There will still be some people that are dissatisfied with the regulations that the agency comes up with, but that dissatisfaction certainly is not the result of any shortcomings in your efforts to be responsive to those constituents. So, I would suggest to you, that model is the one we need to follow here. As my colleague, Professor Galston, of the University of Maryland told you just recently when he testified before you, our system of government is based on the brilliant idea that supreme political authority does not reside in any one level of government, but is shared among them and is ultimately the people's to hold. There has to be a constant renegotiation of the balance of power between the three levels of government, and there just is no silver bullet, no shortcut around those negotiations, which must involve detailed, careful consideration in the context of the specific issues. So I would urge you to consider that ultimately you can provide for all of the assessments in the world, but none of it is going to mean as much as returning to the laws causing the most friction and having the debate fully and honestly in the House and the Senate to decide what the Federal Government policy should be. In the time I have left, and I know it is the end of the day and everybody is a little tired now, I would like to address some of the ambiguities in the bill that I hope you would address. And like my colleague, Professor Gellhorn, I wholeheartedly support the recommendation that you apply the judicial review provisions of, for example, the Unfunded Mandates Reform Act. I am going to focus on Section 7, which contains the provisions that deal with how the agencies do their business. Section 7, as you know, requires that the agencies notify, consult with and provide an opportunity for meaningful participation by public officials potentially affected by a rule. It covers proposed, interim final, and final rules. Federalism assessments must be considered in all decisions regarding a rule. Well, first, I need to correct a small mistake I made in my written testimony. I had said that approximately 4,000 minor rules might be affected. Speaking to Mr. Copeland of GAO earlier, I learned that the actual number is 8,000. I would be happy to provide the figures for the record, and I would like an opportunity to correct my testimony. This bill would apply to all of them. The Unfunded Mandates Reform Act, in contrast, only applies to about 30 to 50 a year. Now, maybe you do not want that small a universe. But somewhere along the continuum, I would suggest to you is a better place to draw lines than at 8,000 rules. In EPA's case, just as an example, this additional workload could easily break the straw of what is already a sagging camel's back. The agency is now functioning with a budget that is a mere 15 percent higher in real dollars than it was in 1985, before the passage of a dozen major new rules, including the 1990 Clean Air Act amendments. And it really is no accident that we love to hate a Federal bureaucracy that can never accomplish what you tell them to do. And, again, these budget realities argue for going back and revisiting some of those laws and trimming out some of the underbrush. Finally, I would urge you to just consider what it is going to mean if people bring agencies to court because they failed to find each and every elected official who was potentially affected by the rule. This bill would exclude the professional administrators that are relied on in highly technical areas like environmental protection. You would not be hearing from the State environment commissioners nor the experts that run the programs. You would be hearing from elected officials only. Would consulting with the staff of the National League of Cities be adequate? What if a handful of local officials from a group of cities that are not members of the League decided that they really dislike a rule and go to court arguing that the League staff failed to adequately represent their interests? In another life, I worked closely with the National League of Cities, and I know that such satisfaction is a really common occurrence. You cannot make all of the people happy all of the time. You cannot tailor legislation to fit every local circumstance. So I would really urge you to consider being clearer in the language so that we do not end up with what Professor Thomas McGarity, in his usual very astute way, calls further ``ossification'' of the rulemaking process, or the endless procedural requirements that make it very difficult for the agencies to fulfill their mandates. Laboring under such a burden, they cannot do what you want them to do and reinvent themselves, as everybody is demanding. I ended my testimony with a quote from D.C. Circuit Chief Judge Patricia Wald, who said in a speech a couple of years ago that all of these procedural requirements that you are asking the courts to administer, in essence, will put them in a ``checklist'' mode rather than a ``safety-value'' mode, where they are trying to focus on catching agency decisions that, on the merits, are just very bad. If they are required to deal with all of these elaborate requirements, you may get a different quality of decision than you really intended to get. And, again, I think that Professor Gellhorn's suggestion regarding judicial review is a good one. Thank you. Chairman Thompson. Thank you very much. You brought my attention to something that occurred to me earlier on. I had made a pledge to myself that I would never use the word ``meaningful'' in any context, in any statement, or be a part of any legislation that had it in it, and I am going to try to do something about that. [Laughter.] Ms. Steinzor. You can see how the courts would react. Chairman Thompson. Well, I mean, even in any context. I think it is the worst-used word in the American language right now, and we can do better than that. I do think that it is a valid point, though, on some of the points that you make, which all are very good ones, to remember that this is not a devolution bill. This does not come down on the side of devolving or not or regulating or not or preempting or not. All it does is try to set the ground rules for when Congress is silent. Congress needs, I think, to address these issues more. You were talking about the Clean Air Act, Congress sat down and decided what they said, ``We are trying to do too much up here, too much of the wrong things. Let us give the States more authority in these areas.'' That was a conscious decision. So I do not think that is what we are trying to do here. We are trying to require Congress to face up to those decisions and to give the agencies and the courts some guidance as to when Congress chooses not to, what the presumption is going from presumption toward preemption, perhaps, to one that is not. The problem, I mean, the point--I have been concerned about putting regulation on top of regulation, and to what extent that maybe we are doing that sometimes. And these things wouldn't be a problem if some of these agencies were doing what they were supposed to. It is not like this consideration of complexity and checklists is in a vacuum. It is in response to another problem, and we are trying to balance all of that out. And we are expending resources, and it does take some time. But the same price--on the other hand, we are saying, the President is saying in an Executive Order, that they ought to be doing these things anyway. So it really points out the fallacious nature of the Executive Order. Because we say, on the one hand, in the Executive Order we ought to be doing all of these things, but on the other hand, we are saying we really cannot because it is costing resources, and we are overburdened. So that is what we are trying to get around here. Ms. Steinzor. May I? Chairman Thompson. Yes, ma'am. Ms. Steinzor. First of all, I think you are having more of an influence than you realize. I spent the summer studying what EPA is doing to devolve its programs, and it is in constant consultation with State officials, it has task forces, it is listening to them very carefully. The concern I have is the unintended consequences. I read an article that was published just a few months back that basically advised anyone who did not like a Federal environmental regulation how to nail it. And one of the major examples was the judicial review provisions of the Unfunded Mandates Reform Act. The article urged people to bring such challenges. Now, I think that is not wrong legal advice. I think that is a very carefully drawn bill. But what I am worried about is that you make a decision, you the Congress, you tell the agencies to go off and do something, and then someone who still has their nose out of joint gets to go running off to court. Chairman Thompson. But do you know what the sanction is for them not doing a proper assessment under the Unfunded Mandates Reform Act? Making them do it, going back and making them do what they were supposed to do to start with. It does not defeat the rule. It does not overturn the rule, even if they do not do it. I would think if that was a concern and I was a part of the Executive Branch, and I was in OIRA, for example, I would say, ``Look, we need to do what we say that we are doing.'' That is the real solution. That is the way to try to avoid this, not fall down on our job and then be critical of those who were trying to come in and make us do what we say that we want to do anyway. But I get your point. I understand what you are saying. I think it is a proper balance that we are trying to reach here. Mr. Nelson, the first of your comments are somewhat in a different direction it seems to me like than Mr. Moss. He was saying here is a review of the cases that indicate that the courts require--I wrote down--that require clear evidence that Congress intended to preempt before the Court will preempt. And then I read your testimony here, and I see in the areas of labor law, Customs, Clean Water Act, patent copyright, and all of that, where you believe that even though there has been some recent adjustment maybe that if Congress is silent on is just kind of jump ball, and there is no telling where the Court is going to come out. They try to determine congressional objectives, and national purposes and all of that. So I take it, he says that it is not that much of a problem, courts are restrained. You do not see that much restraint with regard to the courts, I take it. Mr. Nelson. I think preemption jurisprudence, in general, is just a muddle. I think it is common for courts to invoke a so-called presumption against preemption. Although there is a recent Eleventh Circuit case in which the court says there is no presumption against implied preemption, against obstacle preemption. So I think the lower courts are a little bit confused, despite some suggestions that there is such a presumption. Even if the courts apply a presumption against preemption, they are doing so in the context of a very broad test for obstacle preemption, where Federal statutes are read to include a clause that I think most members of Congress would just consider too vague and too broad to include expressly in any piece of legislation, a clause that says that State law is preempted to the extent it gets in the way of the full purposes and objectives of this statute. I think that is something that just is bound to lead to a muddle. And if you look--looking at law reviews is a hazardous business, but I think the academic commentators who have addressed preemption agree that the jurisprudence is currently pretty chaotic. They tend to focus on preemption in particular areas of the law, but when they do so, they use the words ``chaos'' or ``awful mess'' or ``wildly confused lower court rulings.'' Now, I think when a doctrine causes such problems in area after area, it is time at least to think about whether the unifying doctrine that the courts apply to preemption jurisprudence is just unworkable. Chairman Thompson. You mentioned the problem with the courts trying to determine the common purpose or the common objective when different members of Congress have different purposes and objectives. But it occurred to me that in more cases than not, with regard to not necessarily the subject, the subject of the legislation is one issue and what the common objective was there, if any. But with regard to the question of preemption, there was probably no purpose--it was not a matter conflicting purpose--it was not thought of. My guess is that in most cases this never occurred to anybody, unless there was an obvious situation. And if it is an obvious conflict, then that really kind of solves the problem to a certain extent. But do you think that is a fair assessment? Mr. Nelson. Mr. Chairman, I think that is a fair assessment, and I think the Supreme Court acknowledges as much in some of its cases. In labor cases, for instance, the Court has said, more or less, we know that Congress did not think about this, we know it did not have any intent. We are going to reconstruct what we think it might have wanted to do. Chairman Thompson. What we think it should have been. Mr. Nelson. Very close to the same thing, yes. Yes, Mr. Chairman. I would say one thing, with respect to Mr. Moss's testimony. The case of Gibbons versus Ogden from 1824 is, I would say, an example of a ``direct conflict.'' I am not sure that it would fall under S. 1214. There you had a Federal statute that, at least as construed by the Supreme Court, said, Ships that have Federal licenses can engage in the coasting trade. A New York statute said, Certain types of ships that have Federal licenses--in particular, among other ships, is steamboats--cannot engage in a particular aspect of the coasting trade, ferrying passengers from one place to another place. That seems like a ``direct conflict'' where the Federal statute is saying these ships can do this, and the State law is saying no, they cannot. It seems an example that, perhaps, does not show that the sky would fall under S. 1214. Chairman Thompson. That is a good point. Senator Voinovich. Senator Voinovich. First of all, Professor Gellhorn, thank you for your suggestion that we ought to look at the language of S. 981 in terms of these provisions of judicial review. I also was interested, you talked about eight different assessments that are going on and that perhaps there are eight different assessments required today and that you think that perhaps they could be combined in some way to expedite it? Would you comment on that? Mr. Gellhorn. They range from family values to civil justice reform, to tribal governments, to federalism, to unfunded mandates, to small business impacts, etc. And it seems to me that rather than forcing the agencies to look at each separate Executive Order or each separate statute to find out what is required, it would be sensible to put that all in one assessment requirement imposed upon the agencies--that is, one procedure for engaging in the assessments, one process for identifying notification, one process setting forth for how the agencies should consider the results of their studies, and one similar process for judicial review. Having eight different patterns out there is likely to lead to confusion. Indeed, I think it is, in part, the reason that the agencies are not making the required evaluation in every instance. The courts are not always applying it. And that that ultimately perhaps does create a burden that is unnecessary. So I would suggest that is a simplification. Senator Voinovich. I would like to find out more about your thoughts on that, and how this fits in with what we are doing right here. Because that seems to make a lot of sense to me. Mr. Gellhorn. I am happy to do so. I have been working with your staff. Senator Voinovich. Whether it would be germane to what we are doing here, Mr. Chairman, or not, I do not know, but I would sure like to find out more about it. I was also interested in your testimony about safe drinking water because I was very much involved in that. In fact, I was at the White House when the President signed the bill. And we started out on that legislation, I recall when no one said we would get it done because the environmentalists I recall being accused of wanting to poison the water and everything else. But we worked at it. And I am interested in your reference to that and how it fits in with what we are doing here. Was it the process that went into that, where everybody was together and that is the way we should get things done or was there some specific aspect of Safe Drinking Water that you are honing in on, and I am-- perhaps that portion of it that dealt with the cost benefit process that you go through to determine whether a reg should be carried out or not? Ms. Steinzor. I was making the first point, which is the broader one, that in 1986--and I know you were very actively involved in the debate--you passed a law, not so long ago. And then as people started to implement it, some people became very distressed and came back to you. And in 1996, through this very arduous debate--you rewrote the whole thing. And that is what I am suggesting, that there really is not any replacement for that; that if people are disturbed in the environmental area about the way that all of these programs are working, then the solution is to get back at the organic statutes, the authorizing statutes, and work it out with the ultimate compromise that nobody completely ``wins.'' It was really the perfect melding of all of the different interests, and it was very hard work. I mean, the 1990 Clean Air Act amendments, for people who were not here, Senator Mitchell sat in a small room off the Capitol for hours and hours negotiating changes with his colleagues. Senator Voinovich. But the fact is that process that you are talking about does not really help us with the myriad of regulations that are being passed and legislation in terms of whether it is preempting State law or not preempting. Ms. Steinzor. No. What I am concerned about, to be real clear about it, is that you tell EPA to go off and do some regulations after having gone through this big arduous process. There are still some people that are not happy about what the 1996 amendment said. You tell EPA to go off and do their regulations. Those same people that are not satisfied with the compromises and your decisions come in and start complaining to the agency. And then if you are not careful in a bill like this, this becomes a tool to be used to stop all of those regulations that you told them to do, and they never get around to eliminating doing the things that I would agree they need to do; cut out the underbrush of their excessive regulations, reinvent the way they do business, give local and State Governments more flexibility. A couple of court decisions, and they are frozen, and frozen agencies are not any more effective than unduly activist ones. Senator Voinovich. Well, I can tell you I, for years, have participated as a mayor and as a governor in a lot of exercises with Federal agencies, and in all due respect, so often they go through the motions, and that is about the extent of it. And that has been very, very discouraging over the years. I do think, though, that the point you make in terms of the meaningful participation and clarifying what that means is pretty doggone important, so that you don't end up with a lot of controversy about that. It ought to be pretty specific, Mr. Chairman, I think, in order to avoid, first of all, someone claiming it would be arbitrary and capricious, and second of all, just so the agencies understand what that actually means and the people that are supposed to be listening to it understand what that means and know more than what that means. Chairman Thompson. The Senate might say it means whatever it means in the Executive Order. Mr. Gellhorn. Well, I think you can avoid the problem if you have a more limited judicial review. Because the question of who gets notified would not be subject to judicial review under the more narrow approach. That is exactly the kind of question that ought not to be examined in the court, as long as there has been some attempt, a serious, reasonable attempt, to reach out, whether they have a contact with every State or five States, it seems to me not to be something that a court ought to wrangle with. Chairman Thompson. Yes, I was interested in your comments along those lines, too, and perhaps using the Regulatory Improvement Act as an example, where it is you are required to do it, but it goes into the entire rule, and you look at the rule to see whether or not it is arbitrary and capricious. That is a little different though than the unfunded mandates because I do not think there is really any sanction. If they do not do it, you cannot invalidate the rule I think under that act. I think regulatory improvement is probably a better example there. But that is something that we ought to look at because we are not interested in buying a whole lot of new lawsuits, even though I think the bigger potential question does have to do with the opportunity of meaningful participation and all of that. I think that that needs to be a little more specific. But on the others, as I indicated a while ago, it is more of a requirement to make a description or an analysis or the extent of which it does not go into the validity of the rule itself. It is just asking the agency, telling the agencies to describe what is going on. And so it is, you can still, I mean, anybody can file a lawsuit, I guess, but you are not going to hold up or defeat an agency rule if they are doing halfway what they are supposed to be doing, I think, in that regard. Senator Voinovich. Mr. Chairman, one point that is interesting is that I periodically look at the Unfunded Mandate Relief legislation to ascertain whether or not it is doing any good. And in terms of regulations, it is not doing much good at all. But just the fact that you have the point of order, it is amazing the impact that that has had on agencies coming forward with the things that might be interpreted as unfunded mandates. So somewhere along the line, although it is restricted to, what is it, $100 million? It said there is a certain amount of dollars. Mr. Gellhorn. $100 million. Senator Voinovich. Yes, that is involved; that that reduces the area covered. The fact that I think it is CBO is reviewing this has really made a difference, and it kind of, it is comforting to know that the thing is working. Mr. Gellhorn. Well, I think you make a very important point, and that is that one of the purposes behind this bill is to get the agencies to think a little differently, to pay attention to this. It is sort of an intellectual discipline. But it seems to me also that without any judicial review, which is what the administration spokesman suggests, it becomes meaningless because there is no discipline, and we have already seen now several years of inactive response to that kind of---- Chairman Thompson. My guess is they probably know that that horse is out of the barn. Mr. Gellhorn. I think that is right. In fact, they said it by saying they would approve a targeted approach. So I thought the signal was rather strong. Chairman Thompson. I think so. I think we ought to be able to get that done. Do you have anything further, Senator? Senator Voinovich. No. Chairman Thompson. Thank you very, very much. We really appreciate you being here with us and waiting until this late hour. But your analysis and your written statements are extremely helpful to us. And we look forward to working with you further. We are adjourned. 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