[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 Affairs

                               

159-454 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.
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    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.
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    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.
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    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.
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    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.
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    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.
    [Whereupon, at 5:41 p.m., the Committee was adjourned.]


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