Fiscal federalism in the 21st century: comparing the experiences of the U.S. and Spain.

• Author: Perez, Francisco

Federalism is a system of governance in which the central state or national level shares powers with subnational governments. In the U.S. and Spain, shifts in responsibilities between the different tiers of government are the result of multicausal forces. This article identifies several characteristics of the U.S. system and examines its implications for Spain.

Comparing U.S. and Spain

In Spain, the structure of the public sector has become more complicated because of decentralization and the establishment of the European Union. There are currently four levels of government: local, regional, national, and European. Among these levels of government certain functions and responsibilities are distributed such as regulation of private activities, provision of services, and taxation responsibilities. Each one of these levels of government performs its functions with autonomy but also coordinates with others and follows common rules.

In the U.S., governmental activities have for many years been carried out by several institutions, and, often with incredibly complex relationships. In recent years, there has been public debate about devolution - that is, discussion of the gradual transfer of federal responsibilities to lower levels of government. Devolution debates are multi-dimensional and can include the following topics:

1) the debate about more efficient provision and production of public services;

2) better alignment of the cost and benefits of government for diversity of citizens;

3) better fits between public goods and their spatial characteristics;

4) the social valuation of inequality in the level of provision of some basic public services in different areas;

5) increased competition, experimentation and innovation in the public sector;

6) greater responsiveness to citizens' preferences;

7) more transparent accountability in policymaking; and,

8) the existence of multiple levels of political and historical identification of the citizens, at local, national, or international level.

Characteristics of the U.S. System

Compared to Spain and Europe, the U.S. debates can be distinguished by the following factors.

An Open Debate. Although there is a constitutional reference to the division of functions - and even to shared sovereignty - this does nos exclude discussion of the most suitable interpretation to be made of those principles at any given period of time. At the base of this discussion there are two elements: the political struggle for...