Monday, August 15, 2005

Tying Denver to the mast

The Times has a story about Colorado's spending caps:
That constitutional cap on state and local spending, imposed in 1992, has been so effective in curbing government growth that tax opponents are making it the centerpiece of a national campaign. Similar measures are headed for the ballot this fall in California and perhaps Ohio, and parallel efforts are under way in more than a dozen other states.
Tyler Cowen writes:
Stay tuned...I would be surprised if this kind of initiative proved to be a long-run political equilibrium in many states. Voters could simply cut spending by voting for anti-spending politiicians, if they were truly convinced of the merits of that position. In part this is voters wanting to feel they want to cut spending, without actually having the desire to do so, a kind of expressive politics of the right.
Rather, I think it's because each voter wants high spending on programs in her district but low overall spending. In the end this leads to high overall spending since it's very hard for someone's local assemblyperson to achieve higher spending in his own district and low spending in everyone else's. The assemblyperson is helped more in reelection by the former. If voters prefer an equilibrium in which everyone must spend sparingly to one in which everyone's spending is profligate then they can choose the former by agitating for spending caps. But saying that voters would otherwise just vote anti-spending politicians is a bit disingenuous since these politicans often end up spending a lot in their own districts anyway (see the recent transportation bill).

A different reason caps may not be part of a long-run political equilibrium is that it prevents politicians from bringing home the pork. Economic rents for constituents mean political rents for the representative. Whether caps are actually good is debatable. Depressed states should be running larger deficits, but it is rare that these deficits are reversed in good times (see America 2005).


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