Maybe Alexander Hamilton Was Right
Devolution is a disturbing political trend which has lend to a more and more unstable economy.
The Devolution Crisis
If you haven't heard the word "devolution" thrown around very often (especially recently), you are definitely not alone. It's not a frequent concept on national or local news, and it's not something anyone normally reads about in a newspaper or even a decent publication like The Economist. But it's definitely something about which every American must educate his or herself to the fullest extent of their capability.
That's because over the last thirty years it's been one of the driving factors in the slow march that has quietly led the US economy closer and closer to the fiscal cliff politicians and pundits on both sides like to point and yell about on an increasingly regular basis. Devolution is, in short, the process of federating the welfare state: it's the assumption by state governments of things that the national government used to do, like healthcare, welfare programs, social services, and most importantly, paying for all of them.
Why It's Important
The federal government is the only entity in the US that can print currency, a major contributing factor to establishing a stable line of credit via taking on a national debt. In a sense, this sets up kind of a financial revolving door: you can't provide for the general defense and the welfare of the people and all of those other promises made in the Constitution without ringing up a substantial tab. And if you want to borrow money to help pay for that tab (or even more importantly, if you ever want other countries to borrow from you), you need a stable line of credit. If you want a stable line of credit, you need to repay your loans on time, which means you need loans to repay in the first place. Otherwise you're stuck with a poor credit score which bites a huge chunk out of your economic growth.
The individual states can't actually print their own money, meaning they have to be very, very careful with their debt: they have to be able to pay back their loans with actual cash on hand or risk ruining their economies. In fact, many states have actually passed constitutional amendments making it a requirement that their budgets be balanced every year. That severely cripples if not eliminates completely a state's ability to borrow any money at all.
But why are states even having to borrow money in the first place? Short answer: states' rights conservatives. Long answer: states' rights conservatives. You can actually trace this logic all the way back to Thomas Jefferson: if the federal government is responsible for the national debt, then it takes a significant portion of power away from the individual states.
States Are Too Small
Individual states, however, simply don't have the population or infrastructure to generate anywhere near the kind of revenue to assume the debt the most recent wave of states' righters expects them to take on: Medicare, Medicaid, health reform (at least in part), standardized testing and maintaining a competitive university system, road and highway maintenance, law enforcement, fire, power grids, water pumps, etc. And since states can't print their own money, they're actually expected to pay for all of this, on time, every year in some cases.
Alexander Hamilton as early as 1789 seemed to understand the simple concept that debt at least in some part was unavoidable and that the best way to keep it from being a problem is to assume it all under the national government. Making state debt holders national debt holders gives them a stake in the whole union rather than just an individual state, helping to bring the country together (something of extreme importance in the early history of the country). Today, though, this reality is severely under threat. As states assume more and more debt driven by ideological conservatism only to realize too late that they can't pay for social programs, they have to cut those programs, in the process making it impossible to provide for the general welfare, a specific constitutional obligation.
Assuming a national debt is a must to protect the government's being able to meet its constitutional obligations. The federal government must have a line of credit simply to stick around as a government. Alexander Hamilton saw this, why can't contemporary politicians?