Social spending,partisan bias and vote choice. Evidence from the US

Most models in political science and political economy assume that benefiting from public spending increases the likelihood of voting for the government. However, we do not have much empirical evidence on the conditions under which recipients of public spending reward governments for their public transfers. This article studies the electoral implications of welfare spending cuts in the early years of the Reagan Presidency, when public spending changes were particularly pronounced. Using 1982 NES data, this paper demonstrates that voters who lost public benefits punished Reagan but this only occurred when they identified with the Democratic Party. By contrast, benefit recipients not affected by government cuts were more likely to support Reagan, but again this was only significant among voters identifying with the party of government. This paper thus finds that governments cannot automatically “buy” votes by using welfare spending, the influence of which is instead cushioned by party identification.     

All spending is not equal: European Union public spending,policy feedback and citizens’ support for the EU

While public support is central to the problem‐solving capacity of the European Union, we know little about when and why the EU can increase its citizens’ support through spending. Extensive research finds that citizens living in countries that are net beneficiaries of the EU budget are more supportive of the EU, assuming that citizens care equally about all forms of spending. It is argued in this article, however, that the amount of spending is only part of the story. Understanding the effects of spending on support requires a consideration of how transfers are spent. Drawing on policy feedback theories in comparative politics, it is shown that support for the EU is a function of the fit between the spending area and economic need in individuals’ immediate living context. Results from a statistical analysis of EU spending on human capital, infrastructure, agriculture, energy and environmental protection in 127 EU regions over the period 2001–2011 corroborate this argument. As the EU and other international organisations become increasingly publicly contested, the organisations themselves may increasingly try to shore up public support through spending, but they will only be successful under specific conditions.     

Partisan politics and public finance: Changes in public spending in the industrialized democracies, 1955–1989

This paper evaluates the role that partisan politics plays in altering public spending levels. The analysis covers over three decades of data on the developments of the public sectors in 16 OECD countries. The results of the analysis lend firm support to the partisan politics model. Of special note is the distinction between the electorate' and the government' ideological preferences and the dominant role that the former plays. The results also suggest, contrary to conventional wisdom, that partisan political influences have not been eliminated with the tightening of linkages to the international economy.     

Race,Sophistication, and White Opinion on Government Spending

The conventional wisdom in public opinion research suggests that the white public views government spending as a single race-coded issue. This article develops an alternative theory that rests on two propositions. First, the white public sees government spending not as a single issue, but rather, as two distinct issues: spending on the deserving poor and spending on the undeserving poor. Second, political sophistication strengthens the impact racial stereotypes have on attitudes toward spending on the undeserving poor, and it does not affect the relationship between stereotypes and attitudes toward spending on the deserving poor. These hypotheses are tested using data from the 1996 and 1992 NES surveys. The empirical results provide strong support for both propositions.     

From myth to reality: Globalisation and public spending in OECD countries revisited

The prevailing but not unchallenged 'conventional wisdom' in the literature dealing with the impact of globalisation on public spending is that the effects of increased openness can be compensated through the welfare state. Repeatedly, studies have found little evidence for a 'race to the bottom' in taxation or spending. This research note shows that it is premature to conclude that globalisation has no negative impact on public spending. By extending the period of observation into the 2000s, by looking at changes in openness and spending instead of their levels, and by disentangling the effects of openness in the cross-sectional and over-time dimensions of variation, this article shows that the association between increased openness and spending is clearly negative. Although the contribution of this research note is mainly empirical, some theoretical arguments are presented, emphasising the long-term nature and complexity of policy making in the politics of globalisation.     

Procyclical government spending: a public choice analysis

Procyclical government spending occurs when government expenditures increase at a faster rate than income in an economic upturn but fall at a faster rate in a recession. Voracity effects occur when competition for increased spending proves more effective as national income increases. Public choice theory can be applied to describe the distribution of fiscal power across different tiers of government to shed insight into competition for intergovernmental transfers. Politicians have electoral incentives to press for intergovernmental transfers but they also have electoral incentives to signal their ability to manage the economy. With this mix of incentives, the prediction is that intergovernmental transfers will be procyclical and that sub-central government spending will be more procyclical than central government spending. Public choice analysis of pressure for increased public spending predicts a specific pattern of cyclical government spending. This pattern can be observed when analyzing government expenditures in 20 OECD countries between 1995 and 2006.     

SUB‐NATIONAL GOVERNMENT CAPITAL SPENDING IN INDONESIA: LEVEL,STRUCTURE, AND FINANCING

Sub‐national government capital spending is important for both public service delivery and economic development. Currently, Indonesian sub‐national public capital spending appears barely sufficient to cover the annual depreciation of its fixed assets. A substantial proportion of local government investment spending goes to create relatively unproductive assets, such as administrative office buildings. Sub‐national governments finance their capital acquisitions out of gross operating budgets and have thus far not used, to any great extent, either borrowed funds or their significant cash reserves for such purposes. Indonesian sub‐nationals need to spend more on capital than they do now and also need to focus that spending on more useful types of infrastructure. The major constraints to increasing capital spending at the sub‐national level are not related to a dearth of finance, but regulatory rigidities in budget preparation and implementation and, most importantly, a lack of capacity to plan, design and implement investment projects. Copyright © 2010 John Wiley & Sons, Ltd.     

Public Attitudes Toward Social Spending in the United States: The Differences Between Direct Spending and Tax Expenditures

This paper uses a survey experiment to examine differences in public attitudes toward ‘direct’ and ‘indirect’ government spending. Federal social welfare spending in the USA has two components: the federal government spends money to directly provide social benefits to citizens, and also indirectly subsidizes the private provision of social benefits through tax expenditures. Though benefits provided through tax expenditures are considered spending for budgetary purposes, they differ from direct spending in several ways: in the mechanisms through which benefits are delivered to citizens, in how they distribute wealth across the income spectrum, and in the visibility of their policy consequences to the mass public. We develop and test a model explaining how these differences will affect public attitudes toward spending conducted through direct and indirect means. We find that support for otherwise identical social programs is generally higher when such programs are portrayed as being delivered through tax expenditures than when they are portrayed as being delivered by direct spending. In addition, support for tax expenditure programs which redistribute wealth upward drops when citizens are provided information about the redistributive effects. Both of these results are conditioned by partisanship, with the opinions of Republicans more sensitive to the mechanism through which benefits are delivered, and the opinions of Democrats more sensitive to information about their redistributive effects.     

Demands for public spending: An attitudinal approach

This paper develops a conceptual model of public spending demands applicable to attitudinal data on public spending demands and demonstrates its usefulness by estimating qualitative demand equations for six public spending categories: education, welfare, housing, health, highways, and defense. The estimation, based on a data set constructed by merging the 1973 Survey of Consumer Attitudes and Behavior with relevant government data, reveals that tax-prices, private benefit measures and socio-demographic characteristics are instrumental in explaining differences in the public spending demands among individuals.     

Influencing Public Opinion of Space Policy: Programmatic Effects Versus Education Effects

The public is generally supportive of space policy, but less supportive of spending for the National Aeronautics and Space Administration (NASA) compared to other government programs. Previous research has helped identify who is more likely to be supportive of NASA spending, but not why. This study seeks to understand the causal mechanisms that influence support for NASA. Using natural between-survey and induced within-survey experiments, this study attempts to identify factors influencing changes in public support for NASA spending. Short-term programmatic and related media effects appear to have no influence on public support for NASA spending. However, correcting information asymmetries in regard to NASA's budget appears to have a significant positive effect on public support for NASA spending. The findings speak to the importance of the public being well informed on policy issues in order to make a correct policy choice, and demonstrate that individual programmatic aspects may not be as important as overall agency direction.     

Private and public choices in public education: An investigation of trustee effects

The paper applies the concepts of the horizon problem, agency costs, monitoring, and special interest incentives to trustee management of public schools and higher education. We examine whether South Carolina's 1984 Education Improvement Act, a major restructuring of educational organization and spending in South Carolina, is related to the ratio of pupils in private versus public schools. We employ 30 years of county level data in South Carolina, and we uncover several things. There is no statistically credible relation between public school expenditures per pupil and the private school/public school enrollment ratio. However, we do find that the directed changes in rules, organizational structure, and incentives mandated by the 1984 Educational Improvement Act are associated with a reduction in the relative number of children attending private school. We interpret this to mean that the features of the law requiring better accountability and the like were perceived by parents to make for better education while the increased money spent was only a transfer to teachers or some other groups; we find that organization matters more than money.     

Governance reforms and public acceptance of regulatory decisions: Cross-national evidence from linked survey experiments on pesticides authorization in the European Union

Do governance reforms affect public acceptance of regulatory decisions, and if so, how? We tackled this critical but under-studied question through a pair of linked survey experiments on public attitudes toward the reform of European Union (EU) pesticides regulation among a representative sample of the adult population in six EU member states. We tested the expectation that citizens are more likely to accept a regulatory decision that runs counter to their prior policy preferences if it is taken under a procedure they support. We first conducted a conjoint experiment to study whether the specific design of decision-making procedures impacts public support for EU pesticide regulation. In a second linked experiment, we asked respondents whether farmers should be allowed to use glyphosate, the best known and most controversial pesticide. We then asked respondents if they would accept an authorization decision on glyphosate contrary to their prior expressed preference if it were taken under a decision-making procedure they supported. The results demonstrate that a regulatory decision-making procedure respondents support increases their willingness to accept a hypothetical authorization decision contrary to their prior expressed preference. Contrary to the findings of previous research, our study thus provides strong evidence that governance reforms supported by citizens can enhance acceptance of controversial regulatory decisions, even on politicized issues such as pesticides authorization.     

Tax Expenditure Budgets, Budget Policy, and Tax Policy: Confusion in the States

A tax expenditure budget should contribute to efficient and effective public decisions by quantifying the division in the tax structure between provisions that represent revenue policy (distribute the cost of government according to the legislated tax base) and parts that represent budget policy (substitute for direct spending). For this transparency to have the desired impact, however, the tax expenditure budget process and the direct expenditure process must be properly integrated and the tax expenditure budget must make an accurate division between the parts of the tax structure. A review of the 33 states with tax expenditure systems shows many weaknesses in application of the concept and poor linkage to the direct spending budget system. Their most significant flaw is in dividing the tax structure into normal and preference elements; states need greater attention to defining their basic tax structure if they are to have a meaningful tax expenditure budget.     

Demographic structure and the political economy of public education

This article examines the relationship between demographic structure and the level of government spending on K-12 education. Panel data for the states of the United States over the 1960-1990 period suggests that an increase in the fraction of elderly residents in a jurisdiction is associated with a significant reduction in per-child educational spending. This reduction is particularly large when the elderly residents and the school-age population are from different racial groups. Variation in the size of the school-age population does not result in proportionate changes in education spending, thus, students in states with larger school-age populations receive lower per-student spending than those in states with smaller numbers of potential students. These results provide support for models of generational competition in the allocation of public sector resources. They also suggest that the effect of cohort size on government-mediated transfers must be considered in analyzing how cohort size affects economic well-being.     

The impact of parties,economic growth,and public sector expansion: A comparison of long-term dynamics in the Scandinavian and Anglo-American democracies

Abstract. This paper discusses (1) the extent to which the partisan composition of government affects economic policies and macroeconomic outcomes, and (2) the interrelationship between public spending, taxation and economic growth. These two issues are connected. Since target variables and instruments affect each other reciprocally, the specification of the partisan model should encompass both a reaction function and an outcome function. A pooled vector autoregressive model suggests that during the last century left–wing governments in the United States, Britain and Canada have reinforced the growth of both public spending and GNP. Only public sector expansion is affected by partisanship in Denmark, Norway and Sweden. In the Anglo–American countries changes in spending occur before changes in economic growth in terms of a lagged crowding out effect. Spending and revenues appear to affect each other reciprocally. By contrast, public sector expansion in Scandinavia stimulates growth, while taxation leads spending.     

The Policy Design Effect: Proximity as a Micro‐level Explanation of the Effect of Policy Designs on Social Benefit Attitudes

Public and individual support for a policy is affected by how it is designed – that is, how eligibility is determined. This results in universal policies being more popular than contributions‐based policies, which in turn enjoy more public support than the selective kind. The literature on welfare attitudes have argued that this ‘policy design effect’ can be explained by a combination of self‐interest patterns, public perceptions of the recipient group and whether eligibility under the policy is perceived as fair or arbitrary. The explanations, however, lack micro‐level theory and testing as to why the design of a policy affects individual and public support. This article seeks to explain this policy design effect by theoretically outlining and testing how being proximate to recipients of a social benefit affects attitudes towards the benefit. A survey of attitudes towards spending on five social benefits in Denmark shows a large impact on attitudes from being proximate to recipients under selective policies, little or no impact from universal policies and a pattern that falls in‐between for the contributions‐based policy. This article thus provides micro‐level evidence for the different impacts on attitudes depending on the design of a policy, and a possible explanation for why the design impacts attitudes differently.     

The Impact of Public Officials’ Corruption on the Size and Allocation of U.S. State Spending

This article demonstrates the impact of public officials’ corruption on the size and allocation of U.S. state spending. Extending two theories of “excessive” government expansion, the authors argue that public officials’ corruption should cause state spending to be artificially elevated. Corruption increased state spending over the period 1997–2008. During that time, the 10 most corrupt states could have reduced their total annual expenditure by an average of $1,308 per capita—5.2 percent of the mean per capita state expenditure—if corruption had been at the average level of the states. Moreover, at the expense of social sectors, corruption is likely to distort states’ public resource allocations in favor of higher‐potential “bribe‐generating” spending and items directly beneficial to public officials, such as capital, construction, highways, borrowing, and total salaries and wages. The authors use an objective, concrete, and consistent measurement of corruption, the number of convictions.     

Disparities in the Spending Needs of Highland Municipalities

A certain rough consensus holds that highland municipalities have higher spending needs than others, because of the particularly adverse conditions in which they provide essential public services. However, there is no empirical evidence to support this assertion. This study examines whether any relevant differences actually exist in the spending policies of highland and lowland municipalities. To this end, we make logarithmic estimations of per capita municipal spending in order to determine whether the indicators selected, which are based on local government powers, adequately reflect spending needs. Our results point to the special circumstances of highland districts as a key explanatory factor for higher municipal spending, along with demographic factors, locational population patterns, economic activity, subsidies, and local fiscal capacity.     

On the (relative) unimportance of a balanced budget

This paper explores the reasoning underlying Milton Friedman's preference for a small, unbalanced budget over a large, balanced one. Because the marginal return from government spending is less than the marginal cost (measured in terms of the amount of income private individuals remain free to spend), government expenditures have more of an adverse impact on the economy in his view than does the method of financing that spending. Using a panel data set comprising the 50 states plus the District of Columbia, we report evidence from the years 1967 through 1992 that growth rates in income per capita tend to be higher in states with smaller public sectors. Moreover, we find that while both deficits and taxes reduce the rate of income growth in a state, the negative impact of government spending is considerably larger at the margin.     

Political-economic aspects of public employment

Abstract. An examination of public employment and expenditure data for 17 OECD countries for the period 1963–1983 reveals decelerating growth in public employment after 1970, whereas expenditure growth rates have been accelerating. Two contrary tendencies in public sector employment since the early 1970s are apparent: a general decline in goods and market services, and a significant increase in communal and social services. Comparative empirical analysis, using a pooled cross section-time series technique, confirms the important contribution of increasing wealth to public employment growth. Similarly, a strong societal position for organised labour and increasing unemployment rates contribute to public employment growth, thereby suggesting the presence of a discretionary stabilization policy. Contrary to expectations, however, increased trade dependence exerts a negative impact. With regard to the relationship between expenditure and employment, a general increase in the employment creation efficiency of spending can be discerned. Empirical estimates again suggest that the importance of labour in political-economic decision-making has intensified the employment creation effect of public spending.