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This chapter explains how American federalism apportions responsibility for domestic policy between federal and state governments, and sometimes localities, often in overlapping ways. Arguments for relying on states versus the federal government can be grounded in political philosophy. Market principles also contribute to federalism debates. Finally, pragmatic considerations seem most important for most issues, most of the time. Citizens and policymakers decide what government performs best on a particular issue in their era. Thus, how states have exercised their enhanced authority in our New Federalism era matters a great deal. (25-57 in Federalism and Health Policy, edited by John Holahan, Alan Weil, and Joshua M. Weiner (Washington, DC: The Urban Institute Press, July 2003).)