Power of the purse
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The power of the purse is the ability of one group to manipulate and control the actions of another group by withholding funding, or putting stipulations on the use of funds. The power of the purse can be used positively (e.g. awarding extra funding to programs that reach certain benchmarks) or negatively (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 direct executive power but have control over budgets and taxation.
In colonial Canada, the fight for "responsible government" in the 1840s centered on question of whether or elected parliaments or appointed governors would have control over the purse strings, mirroring earlier fights between parliament and the crown in Britain.
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 for transfer payments. Most famously the Canada Health Act sets rules that provinces adhere to received health transfers (the largest such transfers). Opponets of this arrangement refer to this situation as the "fiscal imbalance", while other argue for the federal government's role in setting minimum standards in social programs in Canada.
United Kingdom 
The power of the purse's earliest examples in a modern sense is by the English Parliament, which was given the exclusive power to levy 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 levy further taxes and his inability to secure loans from foreign nations, making him much less powerful.
United States 
The power of the purse plays a critical role in the relationship of the United States Congress and the President of the United States, and has been the main historic tool by which Congress can limit executive power. One of the most recent examples is the Foreign Assistance Act of 1974, which eliminated all military funding for the government of South Vietnam and thereby ended the Vietnam War. Other recent examples include limitations on military funding placed on Ronald Reagan by Congress, which led to the withdrawal of United States Marines from Lebanon. Appropriation bills cannot originate in the Senate, but the Senate can amend appropriation bills that originate in the House.
The power of the purse in military affairs was famously subverted during the Iran-Contra scandal in the 1980s. Congress denied further aid to the Contras in Nicaragua. Unwilling to accept the will of Congress, members of the Reagan Administration solicited private donations, 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.
Presently, budget limitations and using the power of the purse form a controversial part of discussion regarding Congressional opposition to the Iraq War. On March 23, 2007, the U.S. House of Representatives passed a supplemental war budget that imposed a timeline on the presence of American combat troops in Iraq, but the legislation was not passed.
The power of the purse has also been used to compel the U.S. states to pass laws, in cases where Congress does not have the desire or constitutional power to make it a federal matter. The most well-known example of this is regarding the drinking age, where Congress passed a law to withhold federal funds for highways in any state that did not raise the age to 21. Congress was not allowed to pass the law itself because the 21st Amendment (which ended Prohibition in the U.S.) gave control of alcohol to the states. In 2009, Congress considered similar legislation regarding texting while driving.
Other uses 
The chairperson of a legislative committee may refuse to give pork barrel funding to a senator or other delegate or representative, or deny his or her appropriations bill or amendment a vote, because he or she refused to support a bill which the chairperson wanted (a tit-for-tat retaliation).
The administration or student government at a college or university may revoke some or even all funding for a student newspaper or student radio station, because it has printed or aired an article or editorial critical of it. This is also an example of censorship.
See also 
- "Cutting Off Nicaragua's Contras". TIME. Jul. 09, 1984. Retrieved 2011-03-03.