Introduction: Ex Uno Plures. Welfare Without Illusion

Two competing visions of federalism have long held sway. The first is based on the idea of an administrative system of delegation, in which the system of delegations is based on some kind of geographic partitioning of the polity. The second sees federalism as a bottom-up structure in which the larger polity is a construct of the smaller polities of which it is composed. Specifically, the claim is that the effects of federalism cannot be fully understood without consideration of the vision of federalism that the participants in their various roles adopt. One important aspect of the vision is the attitude taken to grants from the central to subsidiary-level governments. On the top-down view, such grants represent simply the judgment that taxes and expenditures are subject to different patterns of optimal decentralization. On the bottom-up view, such grants break what is a critical link between spending and taxing decisions at the level of each sub-national jurisdiction.