A Federalist’s Dilemma: Tradeoffs between Legitimacy and Budget Responsibility in Multitiered Welfare States

The constituent units in a federal state must pay attention to a range of issues. One of them is ensuring that their level of government is perceived as legitimate by a majority of citizens. Contrariwise, constituent units in a federation generally bear some responsibility with regard to balancing their budget. Thus subnational policymakers face the dilemma that they must ensure legitimacy of their subnational unit through policy ownership, and, at the same time, manage their budget responsibly, which might entail to disown the cost of that policy, i.e. to offload expenses to other levels of government. One policy example for this dilemma is social assistance – the last safety net scheme meant to provide a subsistence income to anyone who is without it. We examine how the constituent units and municipalities in Germany, Italy, Spain, and Switzerland deal with this dilemma, taking social assistance as an empirical example. Our analysis shows that the combination of a Coming-together federation with Uni-nationalism (Germany) comes along with cost-shifting issues being the most important problem of social assistance politics whereas subnational units do not object to the transfer of policy competences to the federal level. If the country is a Coming-together federation in combination with a Pluri-nationalist polity (Switzerland), cost-shifting remains important but the transfer of policy competences to higher levels of government is less relevant to the political agenda. In case of a Holding-together federation combined with Uni-nationalism (Italy) legitimacy and cost-shifting dynamics play a role, and sub-national policy-makers adopt social assistance programs or delegate them to the national level depending on partisan dynamics and budgetary constraints. The configuration of Holding-together federalism and Pluri-nationalism (Spain) results in decision-makers of all subnational units creating and maintaining social assistance programs but they also try to shift costs to the upper levels of government.