Federalism Under Obama

At first glance, federalism would seem to have fared poorly under the Obama administration. The administration's signature achievements to date involve substantial expansions of the federal government's role, be it through new federal legislation addressing health insurance and financial sector reform or massive injections of federal spending. Such expansions in the federal government's role frequently translate into restrictions on the states. New federal legislation often preempts prior state regulation, and federal spending often comes with substantial conditions and burdens for the states. Not surprisingly, many state officials have sharply criticized these developments at the federal level, often invoking federalism as their fighting flag.\nYet the story of federalism's fate under the Obama administration is not so simple. To be sure, these national developments entail some preemption and new state burdens. But each also has brought with it significant regulatory and financial opportunities for the states. States play a pivotal role in implementing the new federal health insurance legislation, with responsibilities ranging from creating and operating the health insurance exchanges to overseeing premium rate increases to running expanded Medicaid programs. States also have increased regulatory responsibilities under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), which takes a notably restrictive approach to preemption. Preemption by federal administrative agencies has been further curtailed by President Obama's Preemption Memorandum, issued early in his administration, instructing agencies that preemption "should be undertaken only with full consideration of the legitimate prerogatives of the States and with a sufficient legal basis for preemption." Furthermore, a substantial amount of the stimulus funding went to the states, cushioning the effects of the financial crisis on state employment and operations and representing the greatest increase in flexible federal financial aid to the states in thirty years.