In the last two decades, the federal government's role in state and local affairs has shifted markedly from subsidy to regulation. This report examines the origins and effects of the new "regulatory federalism" and proposes reforms. Chapter 1 delineates the subject, chronicling the growth of intergovernmental regulation and discussing the legal basis, the mechanisms, and the adverse effects of such regulation. The next two chapters analyze, respectively, the judicial and the legislative origins of intergovernmental regulation: chapter 2 examines the federal courts' application of constitutional provisions for regulation, their gradual assumption of managerial authority, and their role in future regulatory reform; chapter 3 discusses the history of legislated regulation, policy instruments selected by lawmakers, and political influences on intergovernmental regulation. Chapters 4 and 5 report the consequences of growing regulation for regulatory and regulated bodies: chapter 4 examines difficulties in writing and promulgating regulations, concerns about the scope of regulations, and enforcement problems; chapter 5 reviews research investigating how regulation affects state and local governments. Recent federal reform initiatives--procedural and substantive--are reviewed in chapter 6. Finally, chapter 7 presents six conclusions and recommends policies to reform intergovernmental regulation as a whole, a reform strategy for the newer forms of such regulation, and approaches to improving the regulatory process. (MCG)