Based on the presented view then, it can be considered that the fiscal relationships and the implementation of the fiscal policy hold a vital role which covers more than the economic aspect. Also, the different concepts such as the fiscal decentralization can be considered as an essential force that can contribute to the effect of the fiscal relationship mechanism. The Effects of the Fiscal Intergovernmental Relationships In the stud of the trends and the process of the fiscal intergovernmental relationship, the most important area that is needed to be taken into consideration is the effects that can be attributed to the fiscal policies.
Basically, the effect can be considered to vary on the basis of the changing intergovernmental fiscal relationships. The trends can be attributed to the implemented policies. The policies are considered to be related to the economic and political aspects of governance. A. Possible Detrimental Effects One example that can be sited is the 1986 Tax Reform Act that has effects on the states and local governments. The effects of the said act were considered as per state and locality.
The main variable that was measured is the capability of the local government to sponsor their own infrastructure needs having the tax revenues as the source. Mainly, the effects of the assignment of the total responsibility to the local government decrease the main hold of the state to the welfare of the people (Watson and Vocino, 1990). The said trend is in contrary to the perceived hold of the federal government to the people. But the said generalization and its application can be considered limited to the fact that the main assumption is that the financial sources are limited to the local incomes.
The success and improvement of the state can be attributed to the management of financial processes specifically the taxation. It is important to consider that budget strategy can be considered as the main key to the success in achieving the goals of the state. The balance is the main key that can be hailed important in governance. The said balance is between the internal and external factors that can affect the growth and improvement of the economy. Balance can be achieved if the factors such as spending and taxation, at the least can be balanced (Heakal, 2004).
Although the main target of the fiscal policy is the proper distribution of resources, there are other effects of fiscal policy such as the divided government and the deficits in the state budgets which are now being observed in the US. The issue regarding the divided government can be related to the fact that the fiscal policy is in line with the policies of federalism. The said form of governance can lead to the decrease in the strength of the economy on the basis that the decisions that are made are acted upon separately.
Thus, when is comes to massive economic issues, the response to economic blows can be weak and non-elastic. This can lead to greater damage as compared to the united decision making (Alt and Lowry, 1994). Also, in terms of the case of the United States wherein the governance is in terms of party lists, the probability of the leadership to be divided is of higher probability. This can be due to the fact that competition can magnify the segregation. Balance is still the most important key since problems can also arise locally in a state with political unity on the basis of party list.
The deficits can be blamed in the former leadership and has the tendency to avoid resolution. One of the actions that can be undertaken is the postponement of the solution process of the said problems that have detrimental effects to the state and the nation (Alt and Lowry, 1994). The said effect can be considered to be triggered by the governance and the implementation of the other related government and economic policies. This can then be related again to the