Federalism for AP U.S. Government (page 3)

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By — McGraw-Hill Professional
Updated on Apr 25, 2014

New Federalism

During the administrations of Richard Nixon, Ronald Reagan, and George H.W. Bush the national government attempted to implement a reversal of cooperative federalism and place more responsibility on the states about how grant money would be spent. The term devolution—a transfer of power to political subunits—has been used to describe the goals of new federalism. An example of new federalism is welfare reform legislation, which has returned more authority over welfare programs to the states. The national government directed where much of the money should be spent in the stimulus-spending bills during the first year of the Obama administration.

Fiscal Federalism

The national government's patterns of spending, taxation, and providing grants to influence state and local governments is known today as fiscal federalism. The national government uses fiscal policy to influence the states through granting or withholding money to pay for programs.

  • grants-in-aid programs—money and resources provided by the federal government to the state and local governments to be used for specific projects or programs. The earliest grants often covered public works projects such as building canals, roads, and railroads, and land grants for state colleges.
  • categorical grants—grants that have a specific purpose defined by law, such as sewage treatment facilities or school lunch programs; may even require "matching funds" from the state or local governments; categorical grants may be in the form of project grants (awarded on the basis of a competitive application, such as university research grants) or formula grants (awarded on the basis of an established formula, such as Medicaid).
  • block grants—general grants that can be used for a variety of purposes within a broad category, such as education, health care, or public services; fewer strings attached so state and local governments have greater freedom in how the money is spent; preferred by states over categorical grants.
  • revenue sharing—proposed under the Johnson administration and popular under the Nixon administration, a "no strings attached" form of aid to state and local governments; could be used for virtually any project but never exceeded more than two percent of revenues; eliminated during the Reagan administration.
  • mandates—requirements that are imposed by the national government on the state and local governments; for example, the Americans with Disabilities Act (1990) mandates that all public buildings be accessible to persons with disabilities. Mandates often require state or local governments to meet the requirement at their own expense (unfunded mandates). After the mid-term elections of 1994, the Republican-controlled Congress passed the Unfunded Mandate Reform Act, which imposed limitations on Congress's ability to pass unfunded mandate legislation.


  • Federalism is a system of government in which the powers of government are divided between a national government and regional (state and local) governments.
  • There are both advantages and disadvantages to federalism as a form of government.
  • Federalism can be found in the delegated, reserved, and concurrent powers of the Constitution.
  • Article IV of the Constitution provides for interstate relations, including full faith and credit, privileges and immunities, extradition, interstate compacts.
  • Article IV of the Constitution provides national guarantees to the states.
  • McCulloch v. Maryland and Gibbons v. Ogden upheld national supremacy and expanded the powers of Congress under the commerce clause, respectively.
  • As practiced in the United States, federalism has evolved through many phases, including dual federalism, cooperative federalism, new federalism, and fiscal federalism.

Test your knowledge with these practice questions:

Federalism: AP U.S. Government Review Questions

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