I'm amazed and amused by the convoluted illogic of arguments that try to put a happy face on the blundering Obama administration, especially its nonsensical economic policies.

Federalism, often described as one of the great strengths of the American system, has become a serious impediment to reversing the downturn.

It’s easy enough, of course, to mock state governments nowadays, what with California issuing I.O.U.s to pay its bills and New York’s statehouse becoming the site of palace coups and senatorial sit-ins. But the real problem isn’t the fecklessness of local politicians. It’s the ordinary way in which state governments go about their business. Think about the $787-billion federal stimulus package. It’s built on the idea that during serious economic downturns the government can use spending increases and tax cuts to counteract the effects of consumers who are cutting back on spending and businesses that are cutting back on investment. So fiscal policy at the national level is countercyclical: as the economy shrinks, government expands. At the state level, though, the opposite is happening. Nearly every state government is required to balance its budget. When times are bad, jobs vanish, sales plummet, investment declines, and tax revenues fall precipitously—in New York, for instance, state revenues in April and May were down thirty-six per cent from a year earlier. So states have to raise taxes or cut spending, or both, and that’s precisely what they’re doing: states from New Jersey to Oregon have raised taxes in the past year, while significant budget cuts have become routine and are likely to get only deeper in the year ahead. The states’ fiscal policy, then, is procyclical: it’s amplifying the effects of the downturn, instead of mitigating them. Even as the federal government is pouring money into the economy, state governments are effectively taking it out. It’s a push-me, pull-you approach to fighting the recession.

What sort of idiots would build such an unrealistic policy? It isn't as if the states were recently conjured out of the air. No one can claim to be surprised. That an unrealistic "stimulus" plan doesn't actually stimulate anything is what was expected. What the "stimulus" plan does do is pay off political supporters: to the victor go the spoils.

Now, state cutbacks have not been as severe as they might have been, thanks to the stimulus plan, which includes roughly $140 billion in aid to local governments. That aid, according to a recent study by the Center on Budget and Policy Priorities, has covered thirty to forty per cent of the states’ budget shortfalls. Money for the states translates directly into jobs not lost and services not cut—which is why you can make a good case that more of the stimulus should have gone to state aid. Yet there’s no sign that those budget gaps are getting smaller, and, as the federal money runs out, state tax increases and spending cutbacks are only going to become more common. In the midst of this downturn, some of the biggest players in the economy—state and local governments together account for about thirteen per cent of G.D.P.—will be doing precisely the wrong thing.

Yes, aid should go to the states rather than be used for kick backs to political supporters, but states still need to cut expenses and taxes so that the real economy, the productive parts, will be stimulated. Saving jobs in the bloated bureaucracies does not help with economic recovery. Someone has to actually do productive work. Just as businesses that had grown flaccid and uncompetitive need to fail in a recession, government programs at all levels that had grown like cancers during the boom need to be severely reduced or eliminated during the bust. A sick animal can only support so many parasites.

Even more important, federalism is getting in the way of the creation of a “smart” American power grid. This would involve turning the current hodgepodge of regional and state grids into a genuinely national grid, which would detect and respond to problems as they happen, giving users more information about and control over their electricity use, and so on. It could also dramatically reduce our dependence on oil. Wind power could eventually produce as much as twenty per cent of the energy that America consumes. The problem is that the places where most of that wind power can be generated tend to be a long way from the places where most of that power would be consumed. A new grid would enable us to get the power to where it’s needed. But since nobody likes power lines running through his property, building the grid would require overriding or placating the states—and the prospects of that aren’t great.

This is sick! Screw the people, especially those rural bumpkins. Never mind the idiocy of shipping power long distances from subsidized and unreliable wind farms, with huge transmission losses along the way and huge costs to build the lines in the first place. Never mind democracy, self rule and self determination. We have an eeemmmerrrgency.

The tension between state and national interests isn’t new: it dates back to clashes in the early Republic over programs for “internal improvements.” Of course, the federal government is far bigger than it once was, and yet in the past two decades we’ve delegated more authority, not less, to the states. The logic of this was clear: people who are closer to a problem often know better how to deal with it. But matters of a truly interstate nature, like the power grid, can’t be dealt with on a state-by-state basis. And fiscal policy is undermined if the federal government is doing one thing and the states are doing another. It’s a global economy. It would be helpful to have a genuinely national government.

No, it wouldn't be helpful, it would be harmful. The quality of government would monotonically decline from its already low point. What Surowiecki doesn't grasp is systems dynamics. The small inefficiencies of subsidiarity, if removed, would allow the much greater inefficiencies of central control. You have to look at the whole system, the costs as well as the benefits, and you have to consider how it would function over time. The costs of centralization exceed the benefits in the short term and the imbalance grows ever larger over time.

You have to wonder if Surowiecki is serious, if he is really this dim? To be generous I'll assume that he is being disingenuous for political purposes, and that many of his readers are winking and smiling as well. There may be some who really can't grasp the issue, but most of the advocates of centralization are seeking political power at the expense of society and fully realize what they are doing. Organized crime syndicates prey on society, draining it in the short term, and leaving the future to take care of itself. Get while the getting is good and let the devil take the hindmost.