Interest Group and Political Party Influence on Growth in State Spending and Debt

Abstract

Does more lobbying by more interest groups, especially groups representing a state’s largest business sector, lead to greater spending and debt? Or does the blame really rest with state lawmakers and their political parties, which compete to attract and retain the allegiance of these powerful organized interests so they can win control of state government? We test this question with data on annual state budgets from 2006 to 2015, the number of interest groups in each state for those years, the size of the constituencies in different economic and social sectors these groups potentially represent, and the degree of competition between the political parties. Our results reveal that while there is a positive interest group effect on spending, the effect becomes negative as parties compete more for control of the state. As the gatekeepers, lawmakers and their parties, more than interest groups, are ultimately responsible for a state’s fiscal condition.