The 2010 elections exacerbated party polarization and, along with it, a polarization of state federal relations, which is produced when one party controls most of the federal government and another party controls most of the states. The 2010 federal health care law aggravated this polarization and, because of its impacts on the states, produced an unprecedented challenge to its constitutionality by more than half the states. The 2010 federal financial regulation law and the U.S. Supreme Court’s application of the Second Amendment to the states also presage further federal incursions into state and local governance at a time when federal budget cutbacks and rising social welfare costs will heighten state and local fiscal stress.

Unemployment rates remain high and people are unemployed for longer, exhausting state unemployment trust funds quickly. More states are borrowing from the federal government to cover costs, which could have an impact on future fiscal stability.