There are two contradictory motions going on in government in the U.S. At the federal level we are seeing a policy leadership, innovation and huge fiscal investments. Meanwhile, states are undoing much of the federal stimulus by massive cuts in the safety net, and cutbacks in higher and K12 education. State dreams for innovative financial aid for colleges, health care reform, tax reform, education reform and climate changes have taken a back seat to simply salvaging what they have from budget cuts.
The federal impetus has been driven by necessity and a major change in the mood of the nation (not mention the ability to print money). Necessity is the mother of invention. The financial collapse and consequent recession has the forced the Federal government to act swiftly and decisively. This action was enabled by a major change in the mood of the country. The fruits of deregulation and devolution led to financial collapse and public opinion moved decisively towards and larger role for government in stimulus and regulation. In the midst of this downturn we have seen the election of the most activist and proactive president in nearly 50 years.
These conditions and the deteriorating financial situation of states is could lead to a return to federalism. The Reagan Administration started a downsizing of the federal government and a devolution to the states which has gone on for some 25 years. In the next 25 years we could see it again in reverse.