John Donahue is critical of devolving the role of the public sector from the level of the federal government to that of the states. Donahue does not believe that states can relieve us of the need to confront our problems as a nation. He examines the rationale for devolution, including the notion that by allowing states to compete with one another they can become more efficient. He debunks this argument by offering examples of destructive competition in which states pursue the lure of capital through incentives such as location subsidies and tax exemptions, which do not serve to aid the state/local economy in the long run.

Donahue argues there is little evidence that the public sector will be more efficient at the state level than it is the federal level. He says that the challenges facing America today include mitigating cynicism in government on the publics part and narrowing the gap between the benefits expected from government and the citizens willingness to endure taxation. As states take on more responsibilities they open themselves up to more criticism.

Donahue refers to devolution as the endless argument over the equilibrium between nation and state. From early on in U. S. history the balance between national and state authority has been one of contention. Donahue offers the prescription that devolution should occur in situations where states vary greatly in goals and where competition increases efficiency and is not destructive. He does not think that antipoverty policy should be devolved to the states. Donahue believes that a major focus of reform efforts on the part of policymakers should be fixing government as opposed to devolving its responsibilities down to the state level. For Donahue, devolution does not offer an easy alternative to changes on a national level.