Credit Assignment and Federal Encroachment

Abstract

Opportunistic encroachment by the national government on state policy domains erodes the robustness of federal unions. Theories of electoral and political safeguards of federalism suggest that the political process protects federalism's boundaries. This article develops a theory distinguishing risk-seeking and risk-avoiding political behavior and applies its insights to the debate about the sufficiency of the political process to police federalism. Under average conditions, the political process deters encroachment, but under more extreme conditions it fails: elected officials set policy according to the risk associated with their electoral retention rather than the policy's expected return to the voters or the health of the federation; this manipulation of the risk environment may lead a central government to encroach upon a state's domain opportunistically. The federal problem of credit assignment exposes a weakness in the political safeguards theory to protect federalism's boundaries: electoral mechanisms both encourage and discourage encroachment. Due to this fallibility in the political process, judicial intervention in federalism disputes may be justified.

Keywords: federalism, political safeguards, judicial intervention

JEL Classification: D81, H77