Are We All Keynesians Now? Political Ideology and State Deficit Spending in the Great Recession

By Brian D. Blankenship
2012, Vol. 4 No. 07 | pg. 2/2 |

One possible explanation is simply that this study’s assumption that government policy will reflect citizen preferences is wrong, and that during the fiscal emergency presented by the recession, state governments were unresponsive to the inclinations of their constituencies. This is possible, but given the fairly strong correlation between citizens’ ideological leanings and the ideological association of enacted policies (see Gray 2008; Erikson, Wright, and McIver 1989), it seems unlikely.

A more plausible explanation is that conservatives’ and liberals’ fiscal goals differ at the state level versus the national level. Whereas deficit spending by the federal government and the national debt have received a great deal of attention—see the rise of the Tea Party, the debt ceiling debates, and the outcry at President Obama’s high-spending proposals such as the stimulus and the 2013 budget—state deficits have been the target of far less indignation. Indeed, it could very well be that the federal government has received so much attention that the states have largely flown under the radar of deficit hawks or Keynesian partisans. Alternatively, it is possible that conservative citizens are willing to give states an “out” as far as deficit-spending goes, in order to remain consistent with their traditional support for states’ rights and independence. Indeed, this would be consistent with the study of Nice (1986), who finds that states calling for a national balanced budget amendment were no more likely to have “balanced budget requirements” or “debt limits” themselves than states that did not pass legislation calling for a national balanced budget.

Conclusion

The findings presented here support this study’s preliminary hypothesis—that more liberal states will on average have had higher deficits than more conservative states—and are consistent with much of the existing literature on the relationship between ideology and governmental fiscal readjustment. Conservative states tend to show a disinclination for deficit spending and a far greater inclination for budget surpluses than liberal states do, though liberal states did not freely deficit spend by any means.

Admittedly, the conceptual model presented here does not take into account the actual ideological (and partisan) composition of state governments, instead assuming that citizens’ preferences will be reflected in the policy output of those governments. Indeed, there is reason to suspect that all else being equal, ideologically fragmented governments and governments in which one ruling party and ideology has a solid majority will differ in their deficit levels, with the former less likely to be able to make the tough fiscal choices that are necessary to cut budget deficits (Volkerink and de Haan 2001). Similarly, the governors and state legislatures of liberal states would be less able to deficit spend if there was a sizeable (or even majority) conservative presence in the legislature or governor’s seat, respectively, with the opposite applying to conservative states with a liberal legislature or governor as well. I leave it to future research to undertake such an application at the level of state .

As to whether the results presented here can be generalized for other recessions, it is difficult to say. On the one hand, one of the study’s assumptions is that liberals and conservatives have become more polarized on the issue of debt and deficits since the Great Recession. On the other, the data indicates that this polarization is not absolute, as numerous liberal states did not deficit spend heavily. Thus, I suspect that studies of recessions in the recent past would find similar results. One thing, however, seems clear: so long as government “spending” in the abstract remains a highly politicized issue, there will be a clear divide between liberals and conservatives for the foreseeable future.


References

Council of State Governments, The. 2010. The Book of the States: Volume 42. Lexington, KY: The Council of State Governments.

—. 2011. The Book of the States: Volume 43. Lexington, KY: The Council of State Governments.

Cusack, Thomas R. 1999. Partisan Politics and Fiscal Policy. Comparative Political Studies 32: 464-486.

Erikson, Robert S., Gerald C. Wright, and John P. McIver. 1989. Political Parties, Public Opinion, and State Policy in the United States. American Political Science Review 83 (3): 729-750.

—. 2006. Public Opinion in the States: A Quarter Century of Change and Stability. In Public Opinion in the States, edited by Jeffrey E. Cohen. Stanford, CA: Stanford University Press.

Gray, Virginia. 2008. Socioeconomic and political context of the states. In Politics in the American States, edited by Virginia Gray and Russell Hanson (9th ed.). Washington, DC: CQ Press.

Hahm, Seung D., Mark S. Kamlet, and David C. Mowery. 1996. The of Deficit Spending in Nine Industrialized Parliamentary Democracies: The Role of Fiscal Institutions. Comparative Political Studies 29: 52-77.

Mierau, Jochen O., Richard Jong-A-Pin, and Jakob de Haan. 2007. Do Political Variables Affect Fiscal Policy Adjustment Decisions? New Empirical Evidence. Public Choice 133 (3/4): 297-319.

Neck, Reinhard, and Michael Getzner. 2001. Politico-Economic Determinants of Public Debt Growth: A Case Study for Austria. Public Choice 109 (3/4): 243-268.

Nice, David C. 1986. State Support for Constitutional Balanced Budget Requirements. Journal of Politics 48: 134-142.

Smith, Daniel A., and Caroline Tolbert. 2007. The Instrumental and Educative Effects of Ballot Measures: Research on Direct in the American States. State Politics & Policy Quarterly 7 (4): 416-445.

Tavares, Jose. 2004. Does right or left matter? Cabinets, credibility, and fiscal adjustments. Journal of Public Economics 88: 2447-2468.

Volkerink, Bjorn, and Jakob de Haan. 2001. Fragmented Government Effects on Fiscal Policy: New Evidence. Public Choice 109 (3/4): 221-242.


1.) See Elizabeth McNichol, Phil Oliff, and Nicholas Johnson, “States Continue to Feel Recession’s Impact,” Center on Budget and Policy Priorities, 21 March 2012. http://www.cbpp.org/cms/index.cfm?fa=view&id=711 (4 May 2012).

2.) The 2010 version of the Book is used for FY2009 and FY 2010, whereas the 2011 version is used for FY2011.

3.) Data obtained from the Tax Foundation. See Gerald Prante, “Where Do State and Local Governments Get Their Tax Revenue?” Fiscal Fact, 9 October 2009. http://www.taxfoundation.org/files/ff194.pdf (accessed 13 February 2012).

4.) Correlation coefficients range from -1.0 to 1.0. An absolute value of 1.0 indicates a perfect relationship between variables (either negative or positive), a value of 0 indicates no relationship, and a negative value indicates that the variables have a negative relationship.

5.) Regression values indicate how many units the dependent variable (deficit in 2009-11) changes by when the independent variable (ideology) increases by one unit.

6.) Data obtained from USgovernmentrevenue.com. See Christopher Chantrill, “Compare Revenue by State,” USgovernmentrevenue.com. http://www.usgovernmentrevenue.com/compare_state_revenue_2010mZ0a (accessed 3 March 2012).


Appendix

Table 4: Data Values - Conservative States

State Ideology Deficit Licenses Sales Tax Growth Initiative
Mississippi -30.2 -0.143 6.5 36.1 -1.4 1
North Dakota -26.9 -52.532 20.7 21.9 9.1 1
Oklahoma -26.7 -7.714 17.8 28.5 0 1
South Dakota -25 0 8.5 40.6 2.8 1
Utah -24.9 -0.669 4.9 28.7 0.2 1
Arkansas -24 0 4.4 41.3 0.8 1
Louisiana -23.7 0.551 9.6 40 6.7 0
Alabama -23.1 -0.67 10.2 29.9 -1 0
South Carolina -22.2 -11.32 7.9 24.3 -0.9 0
Texas -22.1 -13.193 11.6 30.8 3.3 0
Kansas -22.1 -2.38 5.3 26.6 -1 0
Idaho -21.7 -3.586 7.3 26.8 -1.4 1
Tennessee -21.6 -2.123 11.5 45.7 -0.9 0
Nebraska -20.7 -21.278 8 24.3 2.5 1
North Carolina -19.6 -1.84 6 21.9 1.4 0
Indiana -19.2 -16.242 4.3 25.7 0.5 0
Montana -18.9 -54.165 18.8 0 -0.4 1
Georgia -18.5 -32.042 3.2 29.9 -3.5 0
Kentucky -17.5 -0.432 6.5 20.6 1.3 0
Missouri -16.5 -4.848 6.1 26.2 -2.4 1
Nevada -16.3 -16.285 14.3 33.8 -6.9 1
Alaska -15.6 4.666 52.6 3.7 10.8 1
Iowa -15.4 -12.369 7.2 21.2 2.1 0
Virginia -14.5 -1.23 8.3 14.5 2.3 0
Wisconsin -14.4 -4.632 5.5 19 -0.3 0

Table 5: Data Values - Liberal States

State Ideology Deficit Licenses Sales Tax Growth Initiative
Ohio -14.3 -3.898 7.2 20.5 -2.1 1
West Virginia -14.1 -36.209 12.4 18.4 6.8 0
Arizona -13 11.591 4.6 40.1 -5 1
Wyoming -11.7 -0.622 30.1 28.3 9.5 1
Pennsylvania -11.5 6.077 12 17 1.3 0
Florida -11.1 -6.315 11 33.2 -2.3 1
Michigan -10.9 -4.648 5.3 21.5 -2.1 1
Oregon -9.1 6.125 12.6 0 -1.5 1
Washington -9 1.079 11.1 47.5 -0.8 1
New Mexico -8.8 -8.699 17.5 36.1 5.1 0
Colorado -8.6 -5.848 5.9 27.1 0.9 1
Maine -8.4 -2.15 6 18.7 -0.2 1
Minnesota -8.2 -7.133 6.8 19.2 0.3 0
New Hampshire -7.4 -0.096 8.3 0 -0.4 0
Illinois -6.9 -2.488 6.6 16.6 -0.8 1
Maryland -4.4 -2.947 9.8 12.7 2.1 0
Delaware -3.7 -35.581 34.1 0 3.4 0
California -2.6 -1.497 7.2 24.2 -1.9 1
Rhode Island -2.6 3.098 3.9 18.3 1 0
New Jersey -2.4 -5.309 6 16.8 -1.4 0
New York -1.5 -8.664 6.3 16.4 2.1 0
Connecticut -0.9 5.63 4.3 14.4 1.3 0
Hawaii 0 -0.616 5.6 38.9 -1.4 0
Massachusetts 3.5 -6.499 4.3 12.7 0.9 1
Vermont 8 -0.028 6 11.5 0.9 0

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