What Divided Government Does: Deficit Edition

by John Sides on October 26, 2010 · 1 comment

in Legislative Politics,Political Economy

This is the first in a series of posts on what political science can tell us about divided government.

Ezra Klein handicaps the effect of divided government on the deficit:

When you get concrete, in other words, it’s much easier to see how divided government worsens the deficit and very hard to see how it reduces it.

And Matt Yglesias agrees.

Their analysis rests on some sensible thinking about what the Congressional parties and the President want. Let me bring in some political science as well. The article (gated, I’m sorry to say) is by James Alt and Robert Lowry: “Divided Government, Fiscal Institutions, and Budget Deficits: Evidence from the States.”

Based on their model and evidence, divided government usually makes deficits worse. Here’s some of their theory about situations where different parties control each chamber, as is likely to result from next week’s election:

The politicians risk voter anger for failure to act [in response to revenue shocks], but the political costs of delay will be lower in the case of divided government, since voters are uncertain which party to blame. Given this trade-off of costs and benefits, both parties will likely choose a strategy calling for some positive delay, and the result may be a “war of attrition,” with no agreement during the current fiscal year. Some uncertainty regarding the other party’s payoffs is crucial: if each party has perfect information, then each knows who will have to concede first, so the eventual losing party might as well avoid the cost of delay. In our case, especially when legislatures are newly split, each party is likely to be uncertain of the other’s willingness to risk the political consequences of failure to make an adjustment.

Their data come from the American states during the period 1968-87. Their central finding regarding divided government is:

We show how, faced with an unexpected recession or inheriting a deficit, unified party governments not subject to deficit carryover laws might allow it to grow (if they remained in office) while those subject to such laws eliminate deficits more quickly. States with split legislatures also adjust less, regardless of the legal situation, in large part because divided legislatures do not appear to adjust revenues in response to surpluses and deficits.

Whether that specific finding regarding revenues pans out after 2010 is an open question. However, given that both Obama and the GOP have endorsed continuing the Bush tax cuts, with the only real debate over tax cuts for those making $250,000 or more, it seems like revenues will not be adjusted to lower the deficit.

The more general point from this piece: divided government makes it harder to reduce the deficit. Doing this often entails coordinating on unpopular choices—something that becomes more difficult when opposing parties are simultaneously in charge.

{ 1 comment }

chrismealy October 27, 2010 at 1:07 am

The unstated assumption in this discussion is that a deficit is always and everywhere a bad thing. It’s really not. I’d be more interested in how divided government reacts to high unemployment.

Also, does the gridlock zone count as divided government? Since Scott Brown the Senate has been unwilling to address the economic situation, and the House (and probably the President too) won’t bother if they know action will die in the Senate.

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