Panel Paper: Electoral Politics and the Distribution of Federal Program Outlays

Saturday, November 10, 2012 : 10:35 AM
Calhoun (Sheraton Baltimore City Center Hotel)

*Names in bold indicate Presenter

Chris Berry and William Howell, University of Chicago

Scholars have long recognized that a disproportionate share of federal outlays is distributed to electorally competitive districts and states. The politics of federal program outlays take on additional importance during times of recession, when stimulus spending is also a major macroeconomic policy lever. Yet, the partisan political objectives underlying federal spending patterns are not well understood.  If voters reward incumbent House Representatives, Senators, and presidents for federal spending in their communities, and if the incumbents who represent these voters come from different parties, then the gains achieved by one party in one race may be offset by gains for the other party in another.  Recognizing such tradeoffs, leaders of the national Democratic and Republican parties have powerful incentives not just to spend in those geographic regions where their own members face a tough re-election bid, but in those areas where spending does not simultaneously augment the re-election chances of incumbent members of the opposition party in other federal races.  Characterizing the party leader’s objective function by the offices up for re-election in any given electoral cycle, the competitiveness of their races, and the partisan identity of each incumbent, we generate a host of predictions about the geographic distribution of federal outlays across the nation.  We then subject these predictions to empirical analysis by deploying two databases that track the geographic spending of nearly every domestic program over a 24-year period—the largest and most comprehensive panels of federal spending patterns ever assembled.  In total, our data track over $25 trillion (in 2004 dollars) in federal expenditures between 1984 and 2007.  These allotments range from the miniscule and obscure, such as Vocational Training for Certain Veterans Receiving VA Pension ($1,438 in 2003) and the Morris K. Udall Fellowship Program ($44,922), to the massive and familiar, such as Supplemental Security Income ($31 billion) and Pell Grants ($12 billion).  By distinguishing discretionary from formula-based programs, and then estimating a series of district- and county fixed effects models, we are able to identify ways in which federal spending patterns reflect competing electoral considerations between the nation’s two major parties. The findings carry important implications for distributive politics generally, and for stimulus spending in particular.