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The metaphor of "carrot and stick" in terms of fiscal federalism refers to the government supplying states with grants-in-aid. The carrot is the money that is needed by the state or people which is dangled in front of said people/state and held up by the stick which is the rules and regulations that need to be followed in able to qualify to receive that money. The stick is held by the government who holds control of those rules and regulations as well, of course, as the money that is being asked for. The people/state are allowed their grants-in-aid, yet should they fail to meet the requirements of qualification the government can easily yank the stick away.

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