Although both federal and confederate governments are multilateral systems of government that entail a central government as well as smaller state or municipal governments, a federal system assigns more power to the central government, whereas a confederate system reserves most of the power for the states. In a confederation, the central government has no power to tax the people or enforce laws.
In a federation, the central government and the smaller states or municipalities work in agreement but are separate from one another. The powers of the central government and the states are typically enumerated in some type of document, such as a constitution. Conversely, a confederation is basically an alliance between states or nations that agree to work together toward common interests but still retain their individual powers of governance.
The United States utilizes a federal system. The federal government is granted specific powers by the U.S. Constitution, and any powers not granted to the federal government within the Constitution are granted to the states. The states retain some level of independence but are still subject to the governance of the federal government. However, if the United States operated as a confederation, the situation would be reversed. Each state would have the power to override federal power as it saw fit.