Pick Your Poison: Do Politicians Regulate When They Can’t Spend?
Noel D. Johnson
George Mason University - Department of Economics; George Mason University - Mercatus Center
Matthew D. Mitchell
George Mason University - Mercatus Center
California State University, Long Beach - Department of Economics
May 26, 2012
GMU Working Paper in Economics No. 12-53
We investigate whether laws restricting fiscal policies across U.S. states lead politicians to adopt more partisan regulatory policy instead. We show that partisan fiscal policy outcomes do exist across U.S. states, with Republicans cutting taxes and spending and Democrats raising them. We then investigate whether these partisan policy outcomes are moderated in states with no-carry restrictions on public deficits. Lastly, we test whether unified Republican or Democratic state governments regulate more when constrained by no-carry fiscal restrictions. We find mixed evidence that no-carry laws restrict partisan fiscal outcomes but robust evidence that they tend to lead to more partisan regulatory outcomes.
Number of Pages in PDF File: 34
Keywords: Regulation, Taxation, Local Public Finance, U.S. States, Balanced Budget Rules
JEL Classification: H11, H71, D02, K32, L51working papers series
Date posted: April 7, 2012 ; Last revised: October 1, 2012
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