The main issue being targeted in the study conducted is the function of the fiscal interaction between the different institutions in the government falling within the boundaries covered by the nation and state. It can then be considered that the focus of the study are both the internal and the external factors and issues that affect the state specifically in relation to the economic and political aspects. In relation to the said focus, it is important to determine the significance of the fiscal issues and policies.
One of the most important information is the fact that the history of the American political history, the fiscal policy is one of the major players. The said concept can even define the changing American society through the course of history. It is in fact evident that the changes in the nation can defined and explained through the changing facade of the nation’s fiscal federalism (Swartz and Peck, 1990). The study of fiscal intergovernmental issues is through the different phase most importantly related to the historical development of the fiscal policies.
The profile of the changes that is recorded in relation to the fiscal policies through the political history of the country even in the fiscal federalism is one of the most important issues of concern. In addition, the influence of the said policy increased due to the fact that there had been a deregulation in the structure of the federal government, specifically the American Federal System in the 80’s (Swartz and Peck, 1990).
The trend related to the application of the fiscal policy can be traced back to the post WWII era wherein the political and economic systems can be considered reformed based on the imposed need. Prior to the said period, the system can be described as working on the issues as it occurs. On the other hand the when the need for reforms was realized, the government decided on the need for the active action of the government regarding the basic economic, social and political issues as exemplified by the issues on unemployment, business trends, inflation and monetary value.
It can be generalized then that after the conscious reformation of the government policies, the decision making was undertaken through the combination of the monetary and fiscal policies (Davoodi and Zou, 1998; Heakal, 2004). Upon the determination of the need for the economic reforms and in turn the recognition and the implementation of the fiscal policies, consecutive trends ensue. One is the continuous development of federalism and urban policy that leans in the intergovernmental application of decision making process.
Then upon the application of these policies the fiscal trends continues to transform. The main trend varies both on the basis of the time and the geographical setting. Lastly, the new era of fiscal federalism can be observed. Mechanism of Fiscal Policy and Relationship To be able to determine the major effects of a particular policy, it is important to specifically determine the effects and the mechanism of action.
Fiscal mechanism in the government then can be addressed as a factor that is related to the financial issues of a state or nation with policies that can inevitably affect the economy. It can then be stated that the main influence of the government and the political structure is related to the fiscal mechanism. This can be attributed to the fact that it can clearly affect the economic status of the state related to factors such as tax levels, employment and others (Akai and Sakata, 2002; Heakal, 2004).