The cover of Time magazine one month ago delighted me. It was a portrait of a beaming Gov. Arnold Schwarzenegger of California, his arm draped over the shoulders of a smiling Mayor Michael Bloomberg of New York. The headline across their chests: “Who Needs Washington?”

The story was overly focused on the two celebrity politicians, but its main theme — that states and localities are providing leadership while Washington huffs and puffs and produces nothing — hit the right points. Their cover subjects, the magazine said, are “doing big things that Washington has failed to do. In a time of federal policy paralysis, when unchecked partisanship has made compromise almost impossible, when President George W. Bush’s political adviser is a household name but his domestic policy adviser was unknown even in Washington until he was arrested for shoplifting, cities and states are filling the void.”

For someone like me, this is raw meat, not just because of what is being said but also because of who is saying it. I think of Time as part of the core national media that have been slow to see the change in how we are governing ourselves. States and localities in different patterns have been taking on issue after issue that Washington has been either ignoring or obfuscating: medical care, minimum wages, industrial regulation, environmental control and more. On the whole, it has been a healthy dynamic; policy solutions that bubble up from below usually fare better than those dictated from above, as long as Washington eventually imposes some degree of uniformity.

For two reasons, though, my pleasure at the “Who Needs Washington?” cover story was quickly tempered by the immigration debacle in the Senate: As someone who used to watch Congress professionally, I was stunned to see how completely the legislative system has broken down. And it makes people such as me concede there are times and places when the nation does indeed need Washington to take the lead. This was one of them.

As clunky and, in parts, probably unworkable as the immigration “grand bargain” was, a phalanx of conservative radio and cable TV screamers distorted and exaggerated its key elements to the point where some Republicans were vilified for even talking with liberal Democrat Edward M. Kennedy, one of the few true legislators left on Capitol Hill. And GOP leader Mitch McConnell, a former supporter of the plan, hid out in the cloakroom rather than lead.

So now, assuming the script used so often in the past is followed, a wave of new states will start setting immigration policy themselves. But in this case their ideas may not be particularly uplifting.

Just four days after the Senate bill died, Democratic Gov. Janet Napolitano signed a law setting harsh penalties for Arizona businesses that intentionally hire undocumented workers. It was not a bill she sought, but Napolitano concluded that she could hold out no longer for a national policy because “Congress has failed miserably,” as she said at the signing. “The states will take the lead, and Arizona will take the lead among the states.”

But already two major business groups representing farmers, manufacturers, contractors and other businesses sued to block the law from taking effect in January, arguing that enforcing immigration laws is a Washington, not Phoenix, responsibility.

Arizona is not alone. Georgia, Oklahoma and Colorado had earlier enacted laws of varying toughness: limiting public services to undocumented immigrants, blocking their access to forms of identification, imposing sanctions on employers who hire them. In those cases, the legislation was driven mainly by Republicans, with the Democrats split. But the debates exposed new rifts within the GOP, between the business community, concerned about the pool of cheap labor drying up, and an emerging breed of new Republicans who don’t really care what business thinks. The GOP state senator who sponsored the Georgia law is a radio talk show host who dismisses employers as “the ones that are profiting by breaking the law.”

The immigration standoff in Congress came after most state legislatures had adjourned for the year. Since many were waiting to see if the country would have a new national immigration policy, it’s safe to assume there will be a lot more activity when they return.

It won’t just be the states, either. By the middle of May more than a hundred municipalities, from California to Texas to Pennsylvania, were considering or had enacted ordinances to punish employers who hire undocumented immigrants or landlords who rent to them. And since the Senate debate ended, two fast-growing Virginia counties in the Washington suburbs passed similar resolutions limiting access to county services and sanctioning employers.

So the states and localities are at it again, stepping in where Washington will not. And again, we’ll be able to see how tough new laws affect the economies of states such as Arizona and Georgia, each of which has an illegal immigrant population around 500,000. Or in Colorado, where an immigrant labor shortage since the new law hit the books has compelled the state to start lending out its prisoners as farm hands. This time I’m not so delighted.

Peter Harkness is the editor and publisher of Governing magazine, published by Congressional Quarterly Inc.