Financial equalization (USA)

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The financial compensation in the United States ( English equalization financial, fiscal federation ) is a vertical financial system , which the national transfer payments from the central government to the states included.

General

The United States is just as Germany is a federal state with three levels : In addition to the federal level ( English federal level ) as well as the 50 states ( english state govemments ), there are currently about 88,000 local government ( English Local Governments or English municipalities ). They all show some extreme differences in economic structure , tax revenue and government spending . The federal government finances itself primarily from income tax , the states more from consumption taxes .

A financial equalization system literally does not exist in the US, but the central government are the states grants ( english grants ) for specific purposes and policy objectives, such as in health care . However, only a very small part of the federal money is aimed at compensating for existing differences in financial strength. The financial equalization provides vertical transfer payments from the central government to the states. However, these do not serve to compensate for the different economic conditions, and the central government does not assume any liability for the debts of the local authorities ; there is a non-assistance clause ( English no-bailout clause ). It dates from 1842, when over-indebted states unsuccessfully asked the central government for financial help, but it did not intervene. As a result, 12 states went bankrupt. A horizontal financial equalization between the federal states as with the German state financial equalization does not take place.

The higher the share of subnational government spending in total government spending in a state, the more decentralized or federalist the fiscal union. Because a large proportion of federal income in the US comes from individual income tax and compulsory contributions to service providers , while federal spending flows primarily as direct payments to citizens, the potential extent of redistribution between the states via the central state is relatively significant. However, this redistribution is of a structural nature and reacts only to a limited extent to the business cycle ; so it is not intended to cushion the effects of local, regional or national shocks .

species

There are two types of allocation programs, namely the assignments with tight earmarking and strong control by the central government ( English categorical grants , as well as social assistance and compensation for the purpose allocations english grants-in-aid ) and general assignments with large discretionary powers as to the intended use for the recipients ( English block grants ). The “block grants” introduced in 1966 only account for around 14% of all grants. Purpose assignments have the subspecies project assignments ( English project grants ), health assignments ( English formula grants , such as Medicaid ) and project formula assignments ( English project-formula grants ). The latter serve the industrial development in the communities. Assignments may only be used for the specific purpose decreed by the central government. Failure to do so will result in the state repaying these allocations; He has to set up provisions in his balance sheet for the repayment risk .

Among the services provided by the central government transfer payments specifically include grants ( english grants-in-aid ), shares in controlling the higher level ( English shared taxes ), payments in lieu of taxes for tax-exempt objects ( english payments-in-lieu-of-taxes ) , earmarked loans and advances ( English contingent loans and advances ), reimbursement of costs by other levels for the fulfillment of the tasks ( English reimbursements ) as well as all other grants from other levels for the full or partial financing of projects at the recipient level ( English categorial grants ).

The Supreme Court classified "government grants" in 1970 as a constitutional because in the case of welfare ( English welfare benefits ) the receivers have a constitutional claim careful not their claims without administrative procedures to be stripped. Grants from central government ( English federal grants ) are based on the Federal Grant and Cooperative Agreement Act of 1977, thus they are a part in Title 31 Section 6304 of the United States Code (USC) has become. They are financed from state revenue at the federal level.

functionality

The financial autonomy of states and municipalities with regard to their own taxes, duties and fees is only limited in the federal constitution, the subnational constitutions, the laws of the states and in the municipal statutes. The states, like the municipalities, are to a considerable extent dependent on intergovernmental transfer payments; the former from the central government, the latter indirectly from the central government and its respective federal state. The grants of the central government ( English federal grants ), which are mostly earmarked, must - as far as they are to benefit the municipalities - always flow through the budgets of the federal states.

In the USA, individual states with high economic growth flow proportionally higher tax revenues into the US federal budget than states with lower growth. However, this does not result in an increase in US federal spending in high growth states or a decrease in US federal spending in low growth states ( indirect fiscal equalization ). The financial equalization does not provide for transfers that help financially weaker states. The states (with the exception of Vermont ) are required by law or constitutional requirements to present a balanced (operational) budget . The borrowing is only for the financing of investments permitted by the country's bonds are financed. Central government and state borrowing is not regulated. As far as in the states a commitment to balance the budget ( english balanced budget ) is to have these only formal significance because households may be there also balanced with loans. In contrast, municipalities are subject to tight restrictions on their “ deficit spending ” and strict control by their states.

The states, like the municipalities, are to a considerable extent dependent on intergovernmental transfer payments; the former from the central government, the latter indirectly from the central government and its respective federal state. The vertical grants reach about 30% of the expenditure of the states (including Medicaid ) and are federal grants ( English federal grants ), 40% of the income of the local authorities comes from the states ( English state grants ). The grants from the central government are partly passed on from the states to the local authorities. The atomization of this allocation system consists in the fact that the central government currently grants the states around a thousand grants for sometimes very special purposes.

Despite these numerous vertical transfer payments, the USA is not familiar with any mechanisms or instruments of financial equalization, the special function of which - as in Germany, for example - is to align living conditions in the member states. There are no explicit procedures in place in the event of state financial distress. US bankruptcy law does not allow a state to file for bankruptcy, but does allow municipalities to file for bankruptcy. It can be assumed, however, that the creditors of state bonds tacitly assume that the central government would step in if necessary. However, this is doubted in the specialist literature . In 1790, for example, the central state took over the obligations of the member states that were over-indebted as a result of the war of independence (there were similar transactions in 1812 and 1836). However, this only happened after the new constitution had assigned the state's main source of income (at that time tariffs ) to the central government. As a result of the bankruptcy of 12 states, 44 states now have constitutional standards aimed at balancing the budget .

US municipalities ( English municipalities ) are subject to the bankruptcy protection procedure under Chapter 9 of the US Bankruptcy Act. The term “municipality” is defined as a “political subdivision or public body or instrument of a federal state” (11 USC § 101 (40)). This definition is very general, so that it can include cities , counties , townships , school districts and public construction projects. This could theoretically make part of all national debt (currently around US $ 1.8 trillion or 8% of all US national debt) the subject of restructuring .

Individual evidence

  1. ↑ Peter Lösche / Hans Dietrich von Loeffelholz, Country Report USA: History, Politics, Economy, Society, Culture , 2004, p. 541
  2. ↑ Axel Heise, For a reform of financial relationships , in: Konrad-Adenauer-Stiftung (Ed.), Die Politische Demokratie No. 497, April 2011, p. 70
  3. ↑ Willi Paul Adams / Peter Lösche, Country Report USA: History, Politics, Geography, Economy, Society, Culture , 1999, p. 698
  4. ↑ Neue Zürcher Zeitung of November 21, 2015, Where America is still exemplary
  5. ↑ Willi Paul Adams / Peter Lösche, Country Report USA: History, Politics, Geography, Economy, Society, Culture , 1999, p. 266
  6. ↑ Jeffrey M. Elliot / Sheikh R. Ali, The State and Local Government Political Dictionary , 1988, p. 41
  7. ↑ Hans-Peter Schneider, Financial Autonomy of Federal Member States and Municipalities: An International Comparison , 2006, p. 56 f.
  8. ↑ US Supreme Court, Goldberg v. Kelly, 397 US 254, March 23, 1970 (welfare entitlements)
  9. ↑ Hans-Peter Schneider, Financial Autonomy of Federal Member States and Municipalities: An International Comparison , 2006, p. 56
  10. ↑ Hans-Peter Schneider, Financial Autonomy of Federal Member States and Municipalities: An International Comparison , 2006, p. 57
  11. ↑ Henrik Enderlein, The Crisis in the Euro Area: Trigger, Answers, Outlook , in: From Politics and Contemporary History, No. 43, 2010, pp. 7-12
  12. ↑ Yahua Qiao, Interstate Fiscal Disparities in America , 1999, p 161
  13. ↑ National Association of Budget Officers (Ed.), Budget Process in the States , 1975, pp. 40-42
  14. ↑ Hans-Peter Schneider, Financial Autonomy of Federal Member States and Municipalities: An International Comparison , 2006, p. 59
  15. ↑ Berend Diekmann / Christoph Menzel / Tobias Thomae, Convergences and divergences in the “US currency area” compared to the Eurozone , in: Wirtschaftsdienst, 2012, pp. 27–32
  16. ↑ Axel Heise, For a reform of financial relationships , in: Konrad-Adenauer-Stiftung (Ed.), Die Politische Demokratie No. 497, April 2011, p. 71
  17. ↑ Hans-Peter Schneider, Financial Autonomy of Federal Member States and Municipalities: An International Comparison , 2006, p. 58 f.
  18. ↑ Jonathan Rodden, Hamilton's Paradox: The Promise and Peril of Fiscal Federalism , New York, 2006, p. 10
  19. ^ C Randell Henning / Martin Kessler, Fiscal Federation , 2012, p. 17