Fiscal Policy Outcomes and Electoral Accountability in American States

Abstract

We examine whether and when voters in American states hold elected officials accountable for the results of fiscal policy decisions. Clear fiscal policy effects appear in both gubernatorial and legislative elections between 1968 and 1992, independent of the effects of incumbency, coattails, term limits, and macroeconomic conditions. The results show that voters expect Democrats to provide higher levels of taxes and spending relative to state economies. Net of these expectations, Republican gubernatorial candidates lose votes if their party is responsible for unanticipated increases in the size of the state budget, but Democrats do not, and indeed may be rewarded for small increases.Independent of this, the incumbent party is punished for failing to maintain fiscal balance, and accountability is generally stronger following a period of unified party control than under divided government. Taken together, these results show how electoral accountability for fiscal policy outcomes is strong but highly contingent on a complex configuration of party labels, partisan control, expectations, and institutions.

Yardstick competition and the political costs of raising taxes: An empirical analysis of Spanish municipalities

“…This means that voters hold parties more responsible for their most salient goals, punishing the right more severely for tax increases. Lowry et al (1998) show that this is indeed the behaviour of voters in US gubernatorial elections, where Republicans are penalised more severely for tax increases than Democrats 15 . Ideological differences between left and right-wing parties are more marked in Europe and Spain than in the US, even at a local level.We therefore expect that left-wing local governments will be punished less for the municipality's tax increases than right-wing governments.…”

“…Most of the previous literature on the political costs of taxation comes from the U.S. 7 . Because the U.S. is a two-party system, the authors are able to use the vote share of one of the parties as a dependent variable, giving different responses to each of the explanatory variables if the party is the incumbent or the challenger (see, e.g., Peltzman, 1992, Lowry et al, 1998. This procedure will be difficult to apply in our case, given the high number of parties and the fact that in practice a party may play more than two roles 8 .…”

“…However, we also use the vote share of the main party in the government in addition to this variable, which is the 6 The most relevant in terms of local governments controlled are CiU and ERC (right and left-wing, respectively, both in Catalonia), UV (right-wing, in Valencia), and BNG (left-wing, in Galicia), but there are one or two in each region. 7 Early U.S. analyses include Pomper (1968 and1976), Turett (1971) and Hansen (1983) and there are plenty more recent papers (Kone and Winters, 1983;Niemi et al, 1995;Brooks and Prysby, 1992;Case, 1995, andLowry et al, 1998). There are a few papers on this outside the U.S.: in Canada (Landon and Ryan, 1997), in Belgium (Vermeier and Heyndels, 2004), and in the UK (Gibson, 1988;Gibson and Stuart, 1992;Rallings and Thrasher, 1997;Revelli, 2002).…”

“…Persistence in the vote share would suggest that once in power it becomes more difficult to lose the support gained from the public, thus giving an indication of some kind of 'incumbency advantage' (see for example, e.g., Lowry et al, 1998). We also include a vector of political characteristics in the equation, t i z , , which controls for the effects on the vote of having a coalition government or a government that is in its first term.…”

The size and scope of government in the US states: does party ideology matter?

“…In particular, when exploring policy changes, situations with divided government would seem to exclude any partisan influences while unified governments would be more able to shift government spending, tax policy and institutional characteristics in ideological directions. Of the comparatively few studies to explore this situation, Alt and Lowry (1994) find that states with divided government respond differently to economic shocks than those with unified government (see also Lowry et al 1998, Alt et al 2002.…”