Fiscal federalism and American exceptionalism: why is there no federal equalisation system in the United States?

Abstract

AbstractThis article addresses the absence of a federal equalisation programme in the United States, which is a significant aspect of “American exceptionalism”. Comparing the United States with Australia and Canada, we argue that three factors are relevant when accounting for this absence. On one hand, we turn to two societal factors to explain why there was never much political appetite for the creation of a stand-alone equalisation programme in the United States, namely the lack of a direct threat to the territorial integrity of the United States after 1865 and the comparative weakness of the idea of social citizenship in that country. On the other hand, our analysis shows that key institutional features of American political institutions, particularly strong bicameralism combined with the absence of formal party discipline, help illuminate why it would have been difficult to create an equalisation programme even if there had been some societal pressures to do so.