Final answer:
Grants-in-aid primarily align with cooperative and coercive forms of federalism. Cooperative federalism uses grants to support state-federal collaboration, while coercive federalism uses them to enforce federal mandates.
Step-by-step explanation:
Grants-in-aid are a vital aspect of fiscal federalism, which can be predominantly associated with two forms of federalism: cooperative federalism and coercive federalism. Under cooperative federalism, also known as 'marble cake federalism', there is a blending of state and federal responsibilities, where grants are used to foster state and federal government cooperation in achieving national goals. In contrast, coercive federalism involves a more forceful approach, where the federal government uses grants-in-aid as 'carrots' to entice states, or as 'sticks' to compel state action through financial penalties for non-compliance with federal mandates.
During the era of cooperative federalism, categorical grants became a popular tool, providing specific funds for targeted projects. However, as federalism evolved, the more modern coercive federalism took form, often leveraging federal funding to influence state policies with attached conditions.
The philosophy behind using grants-in-aid is based on the belief that decentralizing policy management can lead to greater efficiency, reduced public spending, and improved outcomes, which is a central tenet of what's known as new federalism.