Feds Starving States to Concoct Funding Imperatives

Federal systems, in a similar way to a common currency zone, seem tailor made for neoliberalism. By starving currency-using state governments of funds, a currency-issuing federal government is able artificially to create a need for the states to find private sources of funding that would be better provided through fiscal transfers. Details from one federal system to another differ. In Australia, the taxing powers of the states are deliberately restricted relative to their responsibilities over service provision. In the eurozone, member governments have voluntarily poleaxed their capacity to run deficits.

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