i need help understanding fiscal imbalance?

Answer 1

Fiscal imbalance is the term used by governments to describe a monetary imbalance between the national government and smaller, subordinate governments, such as those of states or provinces.

A vertical fiscal imbalance occurs when the revenues of different levels of government do not match their expenditure responsibilities. This will necessitate transfer payments from the overendowed party to the underendowed party (vertical fiscal equalization).

A horizontal fiscal imbalance occurs when different regions of a country have different abilities to provide services due to different abilities to raise funds. This can occur if regions are able to raise more funds through their tax bases than other regions and/or the cost of provision of services is higher in some regions than in others.

This is usually rectified by weighting transfer payments toward the needier regions (horizontal fiscal equalization).

The discussion of horizontal fiscal imbalance and equalisation was of particular importance in the drafting of the new Iraqi constitution. It was a sticking point for the drafting process--with the oil rich regions seeking to minimise the reallocation of revenue while other regions sought to maximise equalisation payments.

Answer 2

Fiscal means money debt. Imbalance could be represented by the scales of justice, thusly: Imagine you're a worker on one scale and there's $60000 on the other scale. To the state, (U.S.) your side of the scale isn't worth spit, until you pay off your $60000 share as part of the national debt. But you'll attain the status of a lugy as long as you keep helping pay the interest on the $9,000,000,000,000 fiscal imbalance. Our present administration seemed to think a few years aqo that we could pay that off by stealing oil, but so far that not-such-great-strategy has raised YOUR fiscal imbalance by $1 trillion of those $9 trillion. So your children, and perhaps you can forget something we used to call Social Security but now call, Bush's Folly. Which, I hesitate to tell you will still be making headlines when Bush utters his last death rattle, Heh! Heh!