Laboratories of Power: Public Policy, Organized Interests, and Interdependence in American Federalism

State governments are now key policymakers in crucial areas including energy, education, labor, and criminal justice, so understanding the politics of policy reform requires grappling with federalism as an institution. My dissertation, Laboratories of Power: State Policy, Interest Groups, and Interdependence in American Politics, offers a new theoretical perspective for understanding interdependent policymaking across and up the federal system. Drawing on policy feedback literature, I argue that subnational policies affect policymaking in other federal units by shaping the emergence, resources, and engagement of organized interests. These dynamics differ from those identified by the literature on policy diffusion, which generally examines the spread of policies across jurisdictions due to political learning and competition. The dissertation provides strong evidence for both horizontal feedback (the politics in one state depends on prior policies adopted in other states) and vertical feedback (how the politics plays out at the national level depends on how it played out in the states).

Of the three causal pathways I identify and study, the first—emergence—may be the most important. Subnational policy decisions fundamentally affect the ability of nascent economic interests to coalesce. Supportive policies in one locale help those interests form and build political capacity, which they then use to influence politics and policy in other locales, as well as potentially expand. In each of the three policy cases examined in the dissertation—solar policy, marijuana policy, and school choice policy—state-level decisions played a key role in the emergence of economic interests that soon became important political actors.

In the case of solar policy, I show that state policies were not only fundamental to the emergence of large installer firms, but also affected the resources these firms had at their disposal to expand and defend pro-solar policies across the country. Drawing on firm-level installation data and lobbying disclosure data, as well as case studies, I demonstrate that an installer’s lobbying activity in a given state is a function not only of its economic presence in that state, but also of its presence in other states. In addition, I highlight a number of cases in which installers lobbied in states where they did not yet have an economic presence in efforts to shift policy and establish new markets for expansion. Moreover, evidence from quantitative data and qualitative case studies indicates that installer lobbying across state lines affected policy decisions. Broadly speaking, these results provide strong evidence for horizontal feedback: the politics of solar in one state depended on prior solar policies adopted elsewhere.

State policies that affect the emergence and resources of economic interests can also affect national politics through vertical feedback dynamics. Economic interests are, in many cases, regulated at multiple levels of government in the US federal system, so might leverage resources amassed due to favorable state-level policies to influence federal politics. Indeed, I find that members of Congress representing districts with more developed distributed solar industries—driven in part by prior state-level policy—were more likely to actively oppose industry-harming tariffs in 2018. These effects are more apparent, and more amenable to investigation using causal inference designs, in the case of marijuana policy. A wave of state-level legalization of marijuana for medical- and adult-use drove the growth of the industry over the past 20 years. I leverage exogenous variation in likelihood of legalization from ballot initiative rules (using instrumental variables analysis), and over-time variation in legalization (using difference-in-differences) to estimate the causal effect of legalization on representation in Congress. Results suggest that legalization had a causal effect on the likelihood that members sponsored liberal marijuana legislation and voted for liberal marijuana bills. The evidence indicates these effects are driven by industry growth wrought by legalization—not attitudinal shifts. Campaign contributions from marijuana industry rose sharply in legalizing states, while difference-in-differences analysis indicates that legalization had no effect on public opinion.

While the solar and marijuana policy cases highlight the emergence and growth of organized interests, subnational policy can also—by changing the“facts on the ground”—engage existing groups, and in doing foster new alliances and affect broader political coalitions. This dynamic is most prominent in the case of school choice policy. State policy has been instrumental to the steady growth of charter schools in recent years, which in many states and districts now challenge the traditional public-school model as well as teachers unions. While charter school growth has empowered charter school networks as political actors, it has also drawn wealthy foundations into the charter policy space. As teachers unions pushed back against charter school growth, these foundations used their vast resources to influence charter policy at the local, state, and national levels. In this way, subnational charter policy has not only been instrumental in constructing the political power of charter schools themselves but has also contributed to the crowd-in of other actors into the broader charter lobby.

While the dynamics I identify in the dissertation may in some cases lead to the spread or diffusion of particular policies, in other cases they will not. An organized interest empowered by policy decisions in one federal unit may, responding to political constraints, advocate for a different set of policies elsewhere—especially when mobilizing vertically to different levels of government (e.g. state to federal). The mechanisms I identify also operate over longer time horizons than traditional diffusion mechanisms, since they depend on policy-driven shifts to the formation, resources, or alliances of organized interests. As a result, conventional diffusion approaches neither theoretically nor empirically capture the full intergovernmental implications of subnational policy decisions in American federalism. By highlighting the scope and power of these intergovernmental feedback effects, my dissertation builds on recent work proposing that state politics and policy is more consequential than traditional perspectives on federalism suggest; and in doing so, perhaps helps to explain why national groups have made such massive investments in state politics in recent years.

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