The federal, confederal, and unitary systems of running a nation are very different from one another. The federal system of democracy is a power-sharing agreement between a powerful national government and its provinces or states. Usually, this type of arrangement is cemented in a contract or constitution. The individual states have their own legislatures and are allowed and/or encouraged to formulate their own laws in a specific sense, so long as they do not violate the laws of the federal government in a general sense. The strong central government is needed for purposes of protection, as well as guiding the smaller states to a general sense of cohesion with national laws. The United States has a federal system of government, and the power flows both ways, from the central government down and from the states upward.
The confederal system of democracy, however, is a system with a weaker central government. The individual states of a confederation are powerful in their own right and do not desire an overarching, powerful central authority. Moreover, this system generally allows any state or province to abstain from the national will if it so desires. Nevertheless, each entity follows the general lead of the central authority; thus, the central authority is a guide in this system. But the real power of this type of government flows upward from the states to the central authority.
A unitary form of democracy requires a strong central authority, and from this authority, all power flows downward to smaller provinces, states, or entities. The United Kingdom is a good example; for instance, England, Scotland, Wales, and Northern Ireland are the entities that make up the unitary system of the United Kingdom. But none of these individual states has the power to change parliamentary procedures or laws. The central authority is absolute, unless it delegates power downward to the entities.
Categorical grants are federal government grants to the states, specifying where funds are to be spent. In other words, if a state accepts a categorical grant, it must spend the funds on whatever the federal government designates. A block grant is funds from the federal government to the states, where the states have the discretion to spend the funds on what they deem necessary.
The leadership in individual states is more likely to know where the problems are in their states; thus, if they receive categorical grants that do not address these problems, then the problems are likely to persist, no matter how much funding they receive. This can be a problem with the categorical grant system. That is why the block grant system was devised. It was a way for states to receive federal aid and to be able to address the unique problems in their states.
Both methods of funding, however, do not necessarily lighten the burden on taxpayers. For instance, these grants are from federal funds (i.e., federal taxes), so a taxpayer in Rhode Island is still paying for a block or categorical grant used in Oregon. How does this grant benefit the taxpayer in Rhode Island? It does not, and this can be the weakness in any grant system.
In a federal system, power is shared between the central government and individual states or provinces. The United States is a good example of a federal system. In a unitary system, power is vested in a strong central government that controls all the states or provinces in its territory. A good example of a unitary system is China. A confederate system features a weak central government and strong states or provinces that follow the central government if and when they choose to. Switzerland is a good example of a confederate system.
The first types of grants-in-aid were categorical grants, which were later consolidated for the first time into block grants during the Johnson administration in the 60s. The Partnership for Health program, which was approved in 1966, was an example of a block grant. On the other hand, the Food Stamp Program is an example of a categorical grant. Block grants are known to be more general in terms of spending, while categorical grants are known to be specific. An issue with categorical grants is that they give the federal government more control over the funds, making the money susceptible to diversion into other programs. Block grants, on the other hand, reduce the level of federal oversight, which impacts federal accountability in case of failure.
Block grants were introduced to provide broad flexibility with regards to the programs. However, its failures have been traced to reduced federal oversight and impracticable allocation formulas.
http://webarchive.urban.org/publications/310991.html
https://www.ushistory.org/gov/3.asp
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