# data[].attributes.attachment_link.title
Market Economy: Crash Course Government and Politics #46

# data[].attributes.body
"Over half of the states and many local governments must adhere to statutory or constitutional limits on taxes levied and/or expenditures"

# data[].attributes.body
-Property tax
-Income tax
-Sales tax
-Fines and fees

# data[].attributes.body
"A bond is a contractual promise on the part of the borrower to repay a certain sum plus interest by a specified date". Used for things like highway construction

# data[].attributes.body
Another way in which states can increase revenue mainly funded through services like higher education and health care

# data[].attributes.body
Programs the federal government requires states find their own funding for

# data[].attributes.attachment_link.readable_text
Definition of Categorical Grants

Imagine you are the governor of a state, and you need funding for state projects. How would you like to receive a boatload of money from the federal government? Sounds good, right? Not so quick... there's always a catch!

This is the basic idea of a categorical grant. A categorical grant is money granted by the federal government to state and local governments, with strict limitations on how it is to be spent. The money can only be received if the state or local government complies with certain regulations. However, the states do not have to take the money if they do not want to comply with the regulations.

Categorical Grants and the Federal System

Categorical grants are a result of the United State's federal system. With this system, the federal government has power in some areas, such as military spending, while the state and local governments have power over other areas, such as schooling, roads and law enforcement. But just because certain areas are the domain of local governments does not mean that the federal government can't influence them. Instead, the federal government uses money to convince the states to comply with national goals. This is where categorical grants come into play.

Take education, for example. Nowhere in the Constitution does it say that the federal government should provide for education. Yet we have a Department of Education in Washington, D.C. Why is that? The simple answer is that the Department of Education does not provide schooling. Instead, it provides federal money to local states to oversee schooling. However, the money is contingent upon local governments meeting the requirements set by the Department of Education.

Categorical grants are the most common types of grants given by the federal government to state and local governments, but they are not the only type. There also exist block grants, which are given by the federal government directly to local governments with few strings attached. They are basically the opposite of categorical grants

Types of Categorical Grants

There are two ways in which categorical grants are distributed. The first way is through formula grants. Here, Congress decides how much it wants to spend overall on a project, and then the money is distributed to all states according to a formula. For example, food stamps are a national program designed to allow those in poverty the ability to buy food. The national government spent just over $75 billion on food stamps in 2013.

But how was that money distributed? Clearly, some states have higher levels of poverty than other states. So, using a formula, the money was distributed to the different states based on the poverty levels and the number of people in each state.

# data[].attributes.attachment_link.keywords[]
categorical grants: definition & examples - video & lesson transcript | study.com

# data[].attributes.attachment_link.title
Categorical Grants: Definition & Examples - Video & Lesson Transcript | Study.com

# data[].attributes.attachment_link.description
Imagine you are the governor of a state, and you need funding for state projects. How would you like to receive a boatload of money from the federal government? Sounds good, right? Not so quick... there's always a catch! This is the basic idea of a categorical grant.

# data[].attributes.attachment_link.readable_text
Definition

Block grants are large chunks of money given to state and local authorities by the federal government for general purposes, such as public enforcement, law enforcement, or community development. They usually have few strings attached to them and give a lot of discretion to the local and state governments in how to spend the money. The opposite of block grants is categorical grants, which are chunks of money given by the federal government to state and local governments that have far more rules attached to them.

Here is an analogy that can help you understand and remember the difference between these grants. Think of the difference between a car loan and a personal loan. With a car loan, you can only use the money lent to you to buy a car. But with a personal loan, you can use the money for whatever purpose you want. Likewise, in a categorical grant, a state or local government can only spend the money in a certain way. But a block grant can be spent any way the state or local government wants so long as it is generally kept within the broader domain of the grant (e.g., healthcare, law enforcement, education, etc.).

Both block grants and categorical grants are the result of the United States' federal system. In a federal system, the federal government is in charge of certain government functions (for example, national defense), and the local and state governments are in charge of other government functions (for example, education). But the federal government often tries to influence state and local governments by offering money grants in exchange for complying with their requirements. For example, all states have adopted 21 as the legal age to drink in large part because the federal government requires the states to enact this rule in order to receive money for their highways. So, even though states are in charge of patrolling their own highways, they must adhere to the federal government's wishes on the drinking age to receive desired funding for their highways.

Examples of Block Grants

In the 2013 fiscal year, the federal government had 25 block grants, as reported by the Congressional Research Service.

One of the biggest block grant programs is called Temporary Assistance for Needy Families, or TANF for short. TANF is commonly called welfare. This block grant replaced an earlier categorical grant called Aid to Families with Dependent Children (AFDC), which placed a lot of requirements on states. Now, under TANF, states have more control over how money is spent.

Another block grant is the Low-Income Home Energy Assistance Block Grant, which provides assistance to low-income families to help pay energy bills. Like TANF, this grant gives a lot of control to states in deciding how to distribute funds across the state. This program is especially important for northern states, where cold winters drive up heating costs.

# data[].attributes.attachment_link.keywords[]
block grants: definition & examples - video & lesson transcript | study.com

# data[].attributes.attachment_link.title
Block Grants: Definition & Examples - Video & Lesson Transcript | Study.com

# data[].attributes.attachment_link.description
Block grants are large chunks of money given to state and local authorities by the federal government for general purposes, such as public enforcement, law enforcement, or community development. They usually have few strings attached to them and give a lot of discretion to the local and state governments in how to spend the money.

# data[].attributes.body
The federal government provides funds to states in the forms of grants which pay for things like welfare. Can be categorical or block grants, which both have their designated purposes

# data[].attributes.body
-Sales tax
-State income tax
-Licensing fees
-Severance tax
-Intergovernmental revenue

# data[].attributes.body
-Central banking system of the U.S.
-Established in 1913
-Control of discount rates
-Buying and selling of government bonds; open-market operations
-Raise or lower reserve requirement
-Executive and legislative branches have little control over the Fed's policies

# data[].attributes.body
The Federal Reserve Systems control of credit cost and supply of money to aid the economy, supply is managed based on state of the economy

# data[].attributes.body
How to government spends collected taxes to help the government. Can be used to stimulate the economy, but must be done very strategically to avoid deficit or government shut down

# data[].attributes.body
Government uses economic indicators to judge the areas in which they need to focus their attention

# data[].attributes.body
"Markets, scales, reports, or figures that give information about how different areas of the economy are performing"