Today time and long usage have led us to think of our fifty states as something akin to provinces, administrative and geographic units of a larger, unified nation. ... Americans before Lincoln's era heard the word "state" ... the way in which we say that France, Germany, and the United Kingdom are states. "United States" was not yet a singular, but a plural noun. Politicians routinely spoke of "these United States," meaning independent, sovereign states unified under an agreed-on federal government. Garfinkle, p 33
Speaking of how federalism won out against republicans,
On one side stood a powerful group who envisioned America as a genuine nation-state, with centralized authority and a complex commercial economy. On the other side stood another group whose members envisioned a more modest national government. Rather than aspire to be a highly commercial or urban nation, it should remain predominantly rural and agrarian. The centralizers became known as the Federalists and gravitated to the leadership of Alexander Hamilton. Their opponents acquired the name Republicans and gathered under Thomas Jefferson and James Madison. Brinkley, p 151
McCulloch vs Maryland led the Supreme Court to back an interpretation of federalism that favored a strong national government. The states' rights issue later stood at the heart of the dispute between the North and South that led to the Civil War. In the 1930's, Franklin Delano Roosevelt coped with the Great Depression by expanding government power considerably. However, the Supreme Court favored dual federalism and stuck down many New Deal programs.
By the later 1930's, the Court had altered its views about balance of power and went on to greatly expand the power of the national government. General welfare became an accepted concern of the national government, resulting in cooperative federalism to spread to all branches.
The 50's and 60's pushed the national government to assume a new role and fight social inequality due to racism and poverty. This dramatically decreased the states' freedom of action. The Supreme Court outlawed racially segregated schools, and Congress passed the Civil Rights Act of 1964 that prohibited racial discrimination in areas regulated by the states. During the War on Poverty of the 1960s, the government became involved in a huge number and variety of programs. The clear boundaries of dual federalism were obliterated.
Nixon fought complicated cooperative federalism with his New Federalism. New Federalism relied primarily on block grants to shift the balance of power between the nation and the states. President Carter campaigned with a promise to reduce the size and cost of the national government. Also, his immediate successors Reagan and Bush promised to shrink the national government. These efforts to minimize the national government relied on: consolidation, budget cuts and freedom for state officials in administering programs.
Since the mid-1960s, Congress has used pre-emption to take over functions that were previously left to the states. Pre-emption works through mandates (which force states to undertake activities) and restraints (which forbid states to exercise certain powers). Mandates and restraints result in shifting costs to states for nationally imposed policies. The Republican-led 104th Congress passed legislation to limit the national government's ability to pass unfunded mandates on to the states.
Multiplicity of government. America includes many more governments than just the singular nation and fifty state governments. There are approximately 87,000 other governments that exercise power over people living within American boundaries.
These 87,000 governments include municipal governments, country governments, school districts and special districts. A decentralized federal system gives more points of access to both citizens and groups representing special interests. However, America participates less in local elections than in national elections, with confusion about local government as a leading reason.
Manipulating Federalism Although the Constitution defines the power of the national and state governments, Constitutional amendments have led to some change in the balance, but so have legislation, judicial interpretation and financial incentives.
Via legislation, the national government forbade various practices used by the states to disenfranchise black people.
Via judicial interpretation, the Supreme Court forced state and local governments to meet demands they were otherwise unwilling or unable to meet (such as forcing reapportionment of legislative districts according to the "one person, one vote" principle.
The national government uses financial incentives to extend its power. Grants give the national government substantial power to induce states to comply with national standards. Categorical grants, targeted for specific purpose, leave recipients with relatively little choice about how to spend the money; block grants, awarded for more general purposes, allow the recipient more discretion.