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Thepower of the purse is the ability of one group to control the actions of another group by withholding funding, or putting stipulations on the use of funds. The power of the purse can be usedpositively (e.g. awarding extra funding to programs that reach certain benchmarks) ornegatively (e.g. removing funding for a department or program, effectively eliminating it). The power of the purse is most often utilized by forces within a government that do not have directexecutive power, but have control overbudgets andtaxation.
In colonial Canada, the fight for "responsible government" in the 1840s centered on question of whether elected parliaments or appointed governors would have control over the purse strings, mirroring earlier fights betweenParliament andthe Crown inBritain.
After confederation, the phrase "power of the purse" took on a particular meaning. It now primarily refers to the federal government's superior tax-raising abilities compared to the provinces, and the consequent ability of the federal government to compel provincial governments to adopt certain policies in exchange fortransfer payments. Most famously, theCanada Health Act sets rules that provinces must follow to receive health transfers (the largest of all such transfers). Opponents of this arrangement refer to this situation as the "fiscal imbalance", while others argue for the federal government's role in setting minimum standards forsocial programs in Canada.
The power of the purse's earliest examples in a modern sense occurred in theEnglish Parliament, which gained the exclusive power to authorise taxes and thus could control the nation's cash flow. Through this power, Parliament slowly subverted the executive strength of the crown;King Charles II was limited in his powers to engage in various war efforts by a refusal by Parliament to authorise further taxes and by his inability to secure loans from foreign nations, making him much less powerful.
In recent years as a result ofdevolution, funding for devolved issues to theScottish Parliament,Welsh Parliament and theNorthern Ireland Assembly has been determined through theBarnett Formula. This formula determines the overall budget of the devolved parliaments for devolved issues proportionally relative to spending on those issues in England. As a result, while responsibility for funding of devolved matters rests with the devolved bodies themselves, they in effect must enact policies of a broadly similar cost to those decided by theUK parliament for England and maintain that broad proportionality in order to ensure the long-term financial viability of such policies.
In the federal government of the United States, the power of the purse is vested in theCongress as laid down in theConstitution of the United States, Article I, Section 9, Clause 7 (theAppropriations Clause), and Article I, Section 8, Clause 1 (theTaxing and Spending Clause).
The power of the purse plays a critical role in therelationship of theUnited States Congress and thePresident of the United States, and has been the main historic tool by which Congress has limited executive power. One of the most prominent examples is theForeign Assistance Act of 1974, which eliminated all military funding for the government ofSouth Vietnam and thereby ended theVietnam War. Other recent examples include limitations on military funding placed onRonald Reagan by Congress, which led to the withdrawal ofUnited States Marines fromLebanon.
The power of the purse in military affairs was famously subverted during theIran–Contra affair in the 1980s.[1] Congress denied further aid to theContras inNicaragua. Unwilling to accept the will of Congress, members of theReagan administration solicited privatedonations, set up elaborate corporate schemes and brokered illegal arms deals with Iran in order to generate unofficial funds that could not be regulated by Congress.
More recently, budget limitations and using the power of the purse formed a controversial part of discussion regarding Congressional opposition to theIraq War. On March 23, 2007, theHouse of Representatives passed a supplemental war budget that imposed a timeline on the presence of American combat troops in Iraq, but the legislation did not become law.
The power of the purse has also been used to compel theU.S. states to pass laws, in cases where Congress does not have the desire orconstitutional power to make it a federal matter. The most well-known example of this is regarding thedrinking age, where Congress passed a law to withhold 10% of federal funds for highways in any state that did not raise the age to 21. The law was upheld by theSupreme Court in theSouth Dakota v. Dole case. Congress was not allowed to change the drinking age directly because the21st Amendment (which endedprohibition in the U.S.) gave control of alcohol to the states. In 2009, Congress considered similar legislation regardingtexting while driving.
This power was curtailed somewhat in a case regarding theAffordable Care Act, in which the Supreme Court ruled in June 2012 that the law's withholding of all existingMedicaid funding for states that failed or refused to expand their Medicaid programs to cover the uninsuredpoor was "undulycoercive", despite the fact that the federal government would pay the entirety of the states' expansion for the first years, and 90% thereafter. It was left unclear what percentage would be considered acceptable.
In the U.S. House or Senate, the chair of alegislative committee may refuse to give funding to a senator or other delegate or representative, or deny their appropriations bill or amendment a vote, because they refused to support a bill which the chair wanted (atit-for-tat retaliation). While typically applied to "pork barrel" spending forspecial interests, it may also block funding for genuine needs of aconstituency or the generalpublic.
The administration orstudent government at a college oruniversity may revoke some or even all funding for astudent newspaper orstudent radio station, because it has printed or aired aneditorial or anews article orsegment critical of it. This is also an example ofcensorship.