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STOP US BEFORE WE SPEND AGAIN: INSTITUTIONAL CONSTRAINTS ON GOVERNMENT SPENDING
Author(s) -
PRIMO DAVID M.
Publication year - 2006
Publication title -
economics and politics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.822
H-Index - 45
eISSN - 1468-0343
pISSN - 0954-1985
DOI - 10.1111/j.1468-0343.2006.00171.x
Subject(s) - veto , economics , legislature , government spending , politics , state (computer science) , government (linguistics) , public economics , welfare , divided government , welfare state , distributive property , deficit spending , balanced budget , macroeconomics , market economy , political science , law , linguistics , philosophy , mathematics , algorithm , computer science , pure mathematics , debt
A distributive politics model establishes that the presence of exogenously enforceable spending limits reduces spending and that the effect of executive veto authority is contingent on whether spending is capped and whether the chief executive is a liberal or conservative. Surprisingly, when spending limits are in place, governments with conservative executives spend more than those with more liberal chief executives. Limits are welfare improving, as is the executive veto when it leads to the building of override coalitions. Using 32 years of US state budget data, this paper also establishes empirically that strict balanced budget rules constrain spending and also lead to less pronounced short‐term responses to fluctuations in a state's economy. Party variables like divided government and party control of state legislatures tend to have little or no direct effect, with political institutions and economic indicators explaining much of the variation in state spending.