Optimal fiscal federalismis the question of which activities should take place at which level of government. | Chapter 6 State and Local Government Expenditures Public Finance and Public Policy Introduction Optimal fiscal federalism is the question of which activities should take place at which level of government. For example welfare programs were historically financed at the federal and state level while education is largely financed at the state and local level. FISCAL FEDERALISM IN THE . AND ABROAD Early in the history of the United States the federal government played a relatively limited role. The last amendment of the Bill of Rights of the United States Constitution states The powers not delegated to the United States by the Constitution nor prohibited by it to the states are reserved to the states respectively or to the people. Figure 1 shows the spending patterns over .
