## Incentive vs. Penalty

Greg Mankiw posts a little something on the equivalence of the government fining someone $1000 and the government giving a$1000 tax rebate to everyone except that one person. What he doesn't mention is something I have thought for a long time, i.e. that the Federal government can and does use a similar technique to overstep the limits of its authority under the Constitution. If, for example, the Feds want the drinking age raised to 24, they run into constitutional trouble with legislation that simply fines states that don't comply. But if they threaten to withhold highway funds for non-compliance, then somehow this is perfectly fine. Isn't taxing everyone, but then funding only to those in compliance effectively the same thing as a fine?