Final answer:
The federal government exerts control over states using fiscal federalism by dispersing funds attached with conditions that align state actions with national policies, using tools like categorical grants and block grants.
Step-by-step explanation:
The federal government uses its financial power to influence states within a dual cooperative federal system. Through practices such as fiscal federalism, the national government dispenses funds to states, which come with attached conditions that serve as incentives or penalties, pushing states to comply with national standards and policies. This dynamic is evident in the use of federal highway funds to enforce regulations like seat belt laws and dru-nk driving standards through a system often termed coercive federalism.
Categorical grants are the main tool for federal influence, as they are allocated for specific purposes and require states to follow strict guidelines tied to the funding. Such grants demonstrate the carrot-and-stick approach of fiscal federalism, offering financial incentives for compliance or enacting punitive measures for non-compliance.
Block grants, however, offer states more discretion in using funds but generally include some federal guidance to ensure alignment with national priorities. Nonetheless, this allows states the sovereignty to tailor spending to their specific needs while still leaning towards federal objectives.