What about Balkanization?

A former boss*, Bruce Fein, critiques the state of federalism today.  He is taken to task by Ramesh Ponnuru at the Corner for, as Walter Olson puts it, a weak op/ed.  However, almost everyone seems to forget that while the 50 state laboratories idea sounds great, there are many areas of state law that impose externalities on people and business outside the state.   Sometimes its time to bury the lab rats and move on.

For example, poor insurance regulation imposes burdens on both in-state and out-of-state consumers.  Out-of-state consumers and firms potentially face higher costs if regulation imposes additional costs without providing any benefit.

Further, by allowing the 50 state laboratory idea to go unchallenged we end up equating med mal reform and product liability tort reform.  Both may be good ideas, but one (med mal) may truly be local really subject to state jurisdiction and the other (prod liability) may be truly interstate in nature.

State interference with interstate commerce was something the founders tried to prevent by granting Congress the commerce power.  Congress could step in and pre-empt 50 balkanizing experiments if it so wanted. The same is potentially true for insurance regulation--50 states are involved in aspects of regulation--some do a pretty good job, but some do not.  The question is whether we ever say the experiment is a failure and pre-empt the puppy. 

I haven't given this question a great deal of thought, but I will give it some as I try to order a bottle of

California

wine over the internet!

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*Bruce was my boss when he was the General Counsel at the FCC during the first Regan administration. (Boy, do I feel old). I was a summer clerk and I wrote a memo on whether an administrative agency had the power to declare a law unconstitutional. (The answer was no, as I recall and I am really stretching here, because even independent agencies were creatures of Congress and therefore could not overrule the legislature that created them.)  The law in question was the portion of the Communication Act underlying the FCC's Fairness Doctrine which was eventually repealed by Congress and which some worry will be resurrected.