Capitol Gains had the pleasure of hosting Amy Liu, former president of, and now a senior fellow at the Brookings Institution, to discuss her work on economic development and the intricate dynamics of state and local government collaboration. The conversation focused on the pivotal role of state and local relationships in shaping national prosperity.
Capitol Gains is made possible by Court Street Group.
The Power Dynamics of State and Local Governments
In our conversation with Amy Liu, she delved into the concept of state preemption, a legal and political tool where state governments limit or entirely override the authority of local governments to make decisions on specific issues. Liu highlighted how this dynamic fundamentally shapes the relationship between state and local governments, emphasizing that these interactions are critical because they occur at the levels of government closest to the people.
State preemption, according to Liu, is not just a legal maneuver; it reflects deeper power dynamics. It often dictates how effectively—or ineffectively—local governments can address pressing issues like public health, climate change, and social inequality. For instance, during the COVID-19 pandemic, the ability of cities and counties to implement mask mandates or vaccination campaigns was sometimes curtailed by state governments, leading to varying outcomes in public health across the country.
Liu stressed that this power struggle has significant consequences for local governance. When state governments preempt local authority, it can stifle innovation and responsiveness at the local level. This is particularly problematic because local governments are typically more attuned to the specific needs and challenges of their communities. Whether it’s managing a public health crisis, implementing climate resilience measures, or addressing economic disparities, local leaders are often in the best position to act swiftly and effectively. However, when their hands are tied by state preemption, the result can be delayed responses, inadequate solutions, and ultimately, a failure to meet the needs of residents.
Moreover, Liu pointed out that this tension between state and local governments is often exacerbated by political differences. In many cases, state governments may be controlled by one political party, while local governments may be dominated by another, leading to conflicts over policy priorities. These conflicts can overshadow the common goals that both levels of government should be working towards, such as economic growth, public safety, and social equity.
The Promise and Challenges of Federal Investments
Liu highlighted the unprecedented level of federal investment in infrastructure, competitiveness, and energy transition. However, she pointed out that the effectiveness of these investments hinges on state and local cooperation. “The promise of these investments comes down to state and local computation,” she said. She cited the example of Jackson, Mississippi, where state interference hindered the city’s ability to address a severe water crisis despite federal funds being available.
The Rural-Urban Alliance
Liu explores the idea of rural-urban alliances, a concept she has championed in her work as a way to bridge the often polarized relationship between rural and urban areas. She explained that despite the political and cultural divides frequently highlighted in national discourse, there are significant and often overlooked commonalities between rural and urban communities. These shared interests can serve as a foundation for collaboration, leading to mutual benefits that can enhance the well-being and economic vitality of both regions.
Liu pointed out a critical fact that challenges the conventional wisdom of a strict rural-urban divide: a large portion of rural America—over 51%—actually resides within metropolitan areas. This means that many rural residents live in close proximity to cities, creating a natural interdependence between the two. For instance, rural communities near metropolitan areas often benefit from access to urban amenities such as consumer markets, banking services, and educational institutions. This proximity allows rural residents to enjoy a higher quality of life, with better access to healthcare, education, and economic opportunities.
On the other side, urban residents and businesses also benefit from their rural neighbors. For example, the farm-to-table movement, which is increasingly popular in urban areas, relies heavily on nearby rural farms. Additionally, urban dwellers often seek out the scenic and recreational opportunities that rural areas provide, further strengthening the economic ties between these regions.
Liu argued that these connections between urban and rural areas are not only beneficial but essential for the overall economic health of a region. She cited examples where regional economic strategies that involve both urban and rural areas have proven successful. These strategies leverage the strengths of each area to create a more balanced and resilient economy, one that can better withstand challenges and provide opportunities for all residents.
However, Liu also acknowledged that these rural-urban alliances are often undercut by political narratives that pit these regions against each other. She urged policymakers to recognize the shared interests between rural and urban areas and to develop policies that foster collaboration rather than division. By focusing on what unites these communities rather than what divides them, it’s possible to create more inclusive and sustainable economic growth that benefits everyone.
Local Innovation and Experimentation
A recurring theme in Liu’s remarks was the need for local innovation and the detrimental effects of state preemption on such efforts. She shared the example of Bozeman, Montana, where state laws banning inclusionary zoning hampered local efforts to address affordable housing. “Did Montana just handicap the ability for Bozeman to manage its own economy and retain local residents?” Liu asked, underscoring the broader implications of such policies.
The Cost to Democracy
Liu concluded by reflecting on the broader implications of state-local dynamics on democracy. “The cost is about democracy,” she warned. “Americans want to see more problem-solving and less focus on politics. If we lose the ability to function and govern at the state and local levels, we lose the American people’s desire to civically engage.”
Moving Forward
The conversation with Amy Liu highlighted the complexities and critical importance of state and local government collaboration in economic development. It underscored the need for proactive problem-solving and innovation at the local level, free from the constraints of politicized state interference. As Liu aptly put it, “What can localities do? If you don’t agree with their approach, help them find an alternative. That’s what most Americans are asking for.”
For those interested in a deeper dive into these issues, we recommend Liu’s January 2023 piece, “Why State and Local Relationships Matter to National Prosperity: A Case for Economic Collaboration,” available through the Brookings Institution.
