For much the same reason, competition among governments leads to better governance. In choosing where to live, people can compare public services and taxes. They are attracted to towns that use tax dollars wisely. Competition keeps town managers alert. It prevents governments from exerting substantial monopoly power over residents. If people feel that their taxes exceed the value of their public services, they can go elsewhere. They can, as economists put it, vote with their feet.
The argument applies not only to people but also to capital. Because capital is more mobile than labor, competition among governments significantly constrains how capital is taxed. Corporations benefit from various government services, including infrastructure, the protection of property rights and the enforcement of contracts. But if taxes vastly exceed these benefits, businesses can — and often do — move to places offering a better mix of taxes and services.
Not only does Federalism create competition between local governments, it allows for more decisions being made at the lowest levels of government, pushing more decisions closer to home.
Federalism is a brilliant concept in that it’s the most effective way for groups of people to organize and operate. In government, business, military or even in team sports, the most effective organizations push decisions to the lowest levels of that organization possible.
A good example of pushing decisions to the lowest level is football. Some of the most important decisions in a game are the “tackle calls” made by offensive lineman. The linemen need to quickly adjust blocking schemes just prior to the snap to pick up defensive stunts, changes in alignment and blitzes. At that point in the game, there is no time for the coach to change the play. The decisions must be made by the players on the field.
In much the same way, a Federalist government pushes more decisions closer to home. This allows for more effective decisions being made by the people most affected by the decisions rather than having decisions made by the bureaucracy in Washington.
After nearly four years of Obama, people understand the importance of Federalism.