Federal Government Spending Research Articles

Some Neglected Social Costs of Government Spending in Farm Programs

AbstractEconomic welfare analyses of farm programs typically assume that the direct social opportunity cost of subsidy payments is one dollar per dollar of government spending. Recent literature suggests that the marginal opportunity cost of a dollar of U.S. federal government spending is more likely to be in the range of $@@‐@@1.20 to $@@‐@@1.50. This implies that the net social costs of farm programs that involve government spending are significantly greater than the typical estimates. In addition, the normative efficiency ranking of alternative policies is sensitive to the marginal opportunity cost of government spending.

The line item veto and public sector budgets: Evidence from the states

The paper examines the claim that gubernatorial line item veto power reduces state spending. Analysis of a rich set of state budget data indicates that long run budgets are not altered by an item veto and that, in the short run, the item veto's potency is contingent upon the political setting. In certain circumstances, governors with political incentives to use an item veto alter spending and revenues in a statistically significant and quantitatively important fashion. These results suggest that state budgets have not been importantly altered as a result of the existence of the line item veto and shed doubt on the use of the line item veto to reduce federal government spending.

Health giving patterns of philanthropic foundations.

The nine years from 1975 through 1983 were years of pressure, concern, and exploration for philanthropic foundations. Changes in the economy, the tax laws, and the federal government’s spending priorities had a major impact on foundation giving. Steady increases in the inflation rate during the 1970s reduced the real value of foundation grant dollars. At the same time, the depressed stock and bond markets reduced the value of foundation assets from which those grant dollars were drawn. The ability of foundations to recover was greatly hindered by the tax code, which at the time required foundations to pay out in grants virtually all of the earnings on their assets. During the early 1980s, the inflation rate gradually fell, the stock market recovered, and, beginning in 1982, the tax law was changed enough to stop the drain on foundation assets. Alongside these improvements, however, came new demands for foundation funds. Foundations responded to this increased demand in different ways. Some reduced their giving in order to rebuild their assets. Others, though frustrated by the impossibility of filling all gaps left by federal funding reductions, felt challenged to fund more efficient and effective programs, in human as well as in material terms. The fluctuation in dollars given is shown in Exhibit 1. Some of the biggest givers in 1980 were not among the biggest funders three years later. This essay highlights patterns in foundation giving in health. It is based on data from samples of foundations in each of three years–1975, 1980, and 1983. The samples ranged from 304 foundations in 1975 to 528 in 1983, and involved a review of over 7,000 grants each year. Foundations were classified each year as large, medium, small, or very small, based on their total giving in real dollars (adjusted for inflation). Interpretation of these data is influenced by information on foundations’

Computers in the schools: The federal role

Large-scale federal government spending on technology for the schools can be justified only if the technology will prove to be a better investment than others that might help overcome the severe problems schools face, and only if the investments will lead to development of a labor force capable of significantly improving this country's capacity to complete effectively in world markets. Current uses of computers in schools do not justify such investments. However, careful consideration of the possible sources of a competitive advantage for the United States in world markets not only indicates the magnitude and direction of the changes that must take place in American schools, but shows as well that a very large investment in information technology for the schools would return large dividends. The central challenge is to convert our schools from organizations designed at the turn of the century to provide a work force for the large-scale production of standardized products; they must be changed to organizations designed to turn out people who can add more value to the products and services they produce than do their competitors. The required adjustment will mean fundamental changes in the recruitment, education and compensation of teachers and an equally thorough redesign of the curriculum. If — and only if — these measures are carried out, then computer work stations embedded in large telecommunications networks should be provided to our schools in a ratio of one station to every two to four students. The work stations should be provided with tool, or application, software — not instructional software — that students would use in virtually every course at every grade level, and should be able to communicate with one another as well as terminals and computers at a distance. The effect would be both to enable students to acquire the substantive skills they will need and to equip them with the ability to use information technology as a tool to accomplish a virtually infinite range of tasks, permitting them to be much more productive than they could otherwise be. The proposed federal program would constitute a major investment by this country both in the future labor force and the current information technology industry, and, as such, would encompass both education policy and economic policy, joined in a single initiative.

Small town triage: a rural settlement policy for the American Midwest

The American Midwest of the 1980s has suffered from a depressed farm economy which has led to rural depopulation. Small towns of fewer than 2500 people have been especially hard hit, and state and federal government spending cuts will tend to accelerate the decline of these towns. The State of Iowa has a multitude of small towns struggling for survival. Iowa faces the choice of spreading public resources among many towns or concentrating those resources on a relative few. In fact, a key settlement policy may be emerging as a means to create growth centers in rural areas and thus limit depopulation and promote economic diversification. Potential growth centers and investment strategies need to be further identified so that state economic development funds can be targeted spent in the most cost-effective manner. This will require considerable regional and state planning and coordination in implementation.

Governmental Spending for Mental Retardation and Developmental Disabilities, 1977—1984

A study of public spending for mental retardation and developmental disabilities in fiscal years 1977 through 1984 reveals that combined state and federal government spending grew by 23 percent despite diminished growth in federal spending after passage of the Omnibus Budget Reconciliation Act of 1981. Combined state and federal expenditures for community services grew by 40 percent, primarily because of an unprecedented rise in state spending. Total state and federal spending for institutional services plateaued, as a 26 percent drop in state appropriations was offset by an infusion of federal dollars, mostly through the Intermediate Care Facilities for the Mentally Retarded program. Federal, state, and local expenditures in fiscal 1984, estimated to total $16.49 billion, are assessed, and future trends in the financing of institutional and community services in the U.S. are discussed.

A Monetarist Model for Economic Stabilization

rji I. HE MONETARIST VIEW that changes in the money stock area primary determinant of changes in total spending, and should thereby be given major emphasis in economic stabilization programs, has been of growing interest in recent years. From the mid-1930’s to the mid-1960’s. monetary policy received little emphasis in economic stabilization policy. Presumed failure of monetary policy during the early years of the Great Depression, along with the development and general acceptance of Keynesian economics, resulted in a main emphasis on fiscal actions — Federal Government spending and taxing programs — in economic stabilization plans. Monetary policy, insofar as it received any attention, was generally expressed in terms of market rates of interest.

Government Spending and Taxation: What Causes What?

In the past few years, as federal deficits have risen to high nominal levels, economists have argued about the effect that raising taxes, ostensibly to reduce deficits, might have on government spending. Some economists, including Milton Friedman, have argued that raising taxes will simply lead to more spending. Others, including James Buchanan and Richard Wagner, have said that the high deficits themselves have been responsible for the growth of federal spending and that if that spending had to be financed completely by direct taxes, people would demand that the federal government spend less. A third group, led by Robert Barro, says that increased taxes and borrowing are results of increased government spending. In section II we briefly review various hypotheses about the relationship between federal government spending and revenues. Section III describes the testing procedure used to discriminate between these hypotheses. The results of four tests are presented in section IV. Section V contains a summary and major conclusions. To foreshadow what follows, we find no evidence that higher real federal taxes today lead to either higher or lower federal spending tomorrow. On the other hand, we find strong evidence that higher spending now will lead to higher taxes later. Our results support a view of the world in which the political system somehow determines how much to spend and then looks for revenue sources to finance that level of spending, including direct taxation, borrowing, and money creation. We also find evidence that real federal revenues are positively affected by real Gross National Product (GNP). Real federal spending also rises with real GNP, but it appears to be independent of the rate of inflation.

Computers in the schools

Large-scale federal government spending on technology for the schools can be justified only if the technology will prove to be a better investment than others that might help overcome the severe problems schools face, and only if the investments will lead to development of a labor force capable of significantly improving this country's capacity to compete effectively in world markets. Current uses of computers in schools do not justify such investments.However, careful consideration of the possible sources of a competitive advantage for the United States in world markets not only indicates the magnitude and direction of the changes that must take place in American schools, but shows as well that a very large investment in information technology for the schools would return large dividends.The central challenge is to convert our schools from organizations designed at the turn of the century to provide a work force for the large-scale production of standardized products; they must be changed to organizations designed to turn out people who can add more value to the products and services they produce than do their competitors. The required adjustment will mean fundamental changes in the recruitment, education and compensation of teachers and an equally thorough redesign of the curriculum.If--and only if--these measures are carried out, then computer work stations embedded in large telecommunications networks should be provided to our schools in a ratio of one station to every two to four students. The work stations should be provided with tool, or application, software--not instructional software--that students would use in virtually every course at every grade level, and should be able to communicate with one another as well as terminals and computers at a distance. The effect would be both to enable students to acquire the substantive skills they will need and to equip them with the ability to use information technology as a tool to accomplish a virtually infinite range of tasks, permitting them to be much more productive than they could otherwise be.The proposed federal program would constitute a major investment by this country both in the future labor force and the current information technology industry, and, as such, would encompass both education policy and economic policy, joined in a single initiative.

Congressional Appropriations and the Electoral Connection

Congressional scholars have frequently reported dramatic shifts in the mood of Congress toward federal spending. In seeking to explain these fluctuations in congressional moods, we develop and estimate an "electoral connection" model of the congressional appropriations process. In this model appropriations decisions are seen to be the product of the responses of reelection-seeking members of Congress to the key political and economic variables in their environment. Analyses of appropriations for thirty-seven federal agencies between fiscal years 1948 and 1979 provided broad support for our hypotheses. First, Congress has been more generous in awarding appropriations during election years than during nonelection years. Appropriations are also influenced by prevailing economic conditions. Higher unemployment leads to higher levels of appropriations, especially for public works agencies. Conversely, Congress has responded to high rates of inflation by holding down appropriations. And as in other areas of public policy, parties matter: the larger the percentage of Democrats in the House of Representatives, the more funds agencies were appropriated. The strong empirical support garnered by our electoral connection model thus adds some much needed balance to the conventional incrementalist view of federal government spending.

Impact of Student Financial Aid on Access

The battle over the federal government's spending levels and its policy toward student financial aid reflects an unstable but fundamental disagreement over the effectiveness of these programs. Appeals to evidence on effectiveness have been absent from the sharp political debate over budget cuts between the Reagan administration and the higher-education community. The administration justified the cuts as part of a program to contain federal spending. Representatives for higher education countered with predictions that the cutbacks would reduce enrollments of financially disadvantaged students, weaken the demand for faculty members, and jeopardize the financial condition of a number of colleges and universities. Neither side paid much attention to whether the student-aid programs had been successful. The most obvious appeal might have been made to the record of these programs, which include outright grants, subsidized loans, and work-study grants. Their purpose is to give students with demonstrated financial need greater access to college, a wider choice among institutions, and a better chance of fin

Government Regulation of Coal Mine Safety

Federal government spending on mine health and safety has strongly reduced bituminous coal mine fatalities when safety law has been strong but not when law has been weak.

Federal Government Spending and Public Opinion

Federal Government Spending and Public Opinion

Legislators, bureaucrats and locational decisions and beyond

For a volume or conference on political economy, we might note that Professor Arnold's paper does not explicitly employ the theories of political economy. It is not developed upon a public choice model. There is no rationality model exposed, developed, or tested. Nor is it on one of the grand topics of political economy, such as class. Further, there is no mountain of data for us to chew upon, so as to better digest our theoretical ideas. Rather, it is representative of informal work done by political scientists which is relevant to the tasks of political economists. Indeed, Professor Arnold's work raises substantial questions for us. The paper fits within our substantive concerns regarding equilibria in the cyclic logrolling processes (Bernholz, 1978; Oppenheimer, 1979; Fiorina, 1978; Shepsle, 1978; Weingast, 1978). Professor Arnold's work is an extension of the logrolling, pork barrel subject which has fascinated so many of us. His characterization of the politician as election oriented is consistent with that of most formal models. Finally, there is a persistent concern with inefficiency and suboptimality that appeals to us. With this in mind, let us consider his paper. As he promises, his paper "explore[s] how the federal government makes decisions about the geographical allocation of expenditures" (p. 107). 1 Professor Arnold does not treat the entire subject, but rather focuses on particular aspects of the government's decisions regarding geographical distribution of largesse. He hones in on: (1) the methods by which these decisions may be made; (2) the political repercussions of these decisions; and (3) (his-real subject) the hypothesis that the amount (or severity) of the political consequences are a function of the decision method employed and the substantive nature of the program. Professor Arnold is ovenmpressed w~th the subject's tmportance: "With the federal government spending nearly a quarter of national output, one cannot ignore the differential geographic effects of that spending, any more than one couldignore its differentialeffects by income or race." (p. 107) But, certainly,with geographical, rather than racial mobility of individuals in the economy, differential racial allocations are not easily overcome, yet many people can switch residences from one area to another. Thus, it is at least not self-evident that the moral qualifies of the questions have equal claim. But the subject clearly has interest to us both on its own and as it informs us regarding governmental behavior in general for theoretical purposes.

A Convention for Proposing Amendments: The Constitution's Other Method<xref ref-type="fn" rid="fn1"><sup>*</sup></xref>

When introducing S.817, the Constitutional Convention Implementation Act of 1981 (Hatch-DeConcini), Senator Orrin Hatch (R-Utah) said, I emphasize again the basic purpose for including the convention of amendment in Article V-the need for the States to be able to amend the Constitution in the face of an intransigent national Government.1 He described the other method of amending the Constitution provided for in Article V, the convention method, as of the basic elements for preserving some semblance of balance between the national and State governments. This version of legislation to provide procedures for a convention to propose amendments is more state-oriented than the previous bills (S.215, 1971 and S.3, 1979), and that fact suggests a slight change in recognition of the virtues of the American federal system. Support for a convention to propose a constitutional amendment has surfaced several times in this century, although with no direct success. The first effort, on behalf of direct election of senators, led to the Seventeenth Amendment. The second, a response to the Supreme Court's apportionment decisions in 1962-1964 (including Baker v. Carr, Lucas v. Colorado, and Reynolds v. Sims), produced nothing. In both cases the number of state petitions came very close to the two-thirds required by Article V of the U.S. Constitution. Since 1975 a campaign organized by the National Taxpayers Union has produced thirty of the requisite thirtyfour applications for a convention to propose an amendment to mandate a balanced federal budget. The drive for a balanced budget amendment to the U.S. Constitution is one answer to the question, how can we limit (federal) government spending? Such an amendment has been introduced in the 97th Congress, as Senate Joint Resolution 58, and among its sponsors are Senator Strom

Using Federal Outlays Data to Measure Program Equity: Opportunities and Limitations

Since the late 1960s, annual reports on federal spending in small areas have been available. This effort was initiated in the Community Services Administration (CSA) (formerly the Office of Economic Opportunity) in 1966 to monitor poverty program funds and was soon expanded to include most federal activities. Currently, the CSA has working annual files and published volumes for fiscal years 1968 through 1976. Published reports known as the Federal Outlays series are issued separately for each state and list the amounts of individual program funds spent by federal agencies in each county and in each city with a population of 25,000 or more. In total, over 1,300 program entries are reported for each county unit in the United States. The Federal Outlays is the only comprehensive series of county-level data on the federal government's spending. Earlier editions of the reports suffer from serious problems of completeness, accuracy, program identification, and definition, many of which have been resolved in recent issues. Beginning with the 1975 issue, program identification was greatly improved by labeling programs with the program numbers given in the Catalog of Federal Domestic Assistance (U.S. Office of Management and Budget). This matching provides the user of the Outlays files easy access to the program descriptions in the Catalog. The purpose of this paper is two-fold: to provide illustrations of how the Federal Outlays data series can be used to address equity issues at the substate level and to give a brief overview of the current limitations of this data series. In exploring equity issues, the Outlays data are used in conjunction with data from the census of population, census of governments, Internal Revenue Service, and selected state departments of taxation. The equity analysis uses data from 1972, the latest year for which comparable data from all sources were available. The simple equity analyses that follow are illustrations of possible uses of the Outlays files and are not meant to provide firm answers to equity issues in federal spending.

Empirical aspects of regional growth in the United States

This study reports some results on the determinants of regional growth at the state level, using gross state product estimates for 1955–64 and drawing upon 28 independent variables. Theoretical hypotheses relating to the influences of demographic variables, amenities, agglomeration economies, business behaviour, labour market and policy variables are tested as well as a descriptive equation. Also, ‘good fit’ equations were derived by stepwise regression procedures. The equations had a high explanatory value. Several variables showed that the more backward states grew faster, supporting the convergence hypothesis. Differences in thespatial distribution of population and economic activity within states were closely associated with variations in growth rates, suggesting that the non-spatial models that have dominated regional growth analysis are deficient. Two instrumental variables, tourist expenditures and federal government spending, were highly significant. It is important, therefore, to incorporate the government sector in regional growth theory. On the other hand, several plausible independent variables either were insignificant or had the wrong sign: education, scientific and technical personnel, the profit rate, gross savings, income potential, unemployment and air pollution. Monocausal explanations were not supported; the regional growth process appears a much more complex and interrelated phenomenon than implied by the simple growth models. Finally, current state growth performance was not independent of past conditions, indicating that the regional growth process is to some extent historically determined.

Monetary and Fiscal Actions: A Test of Their Relative Importance in Economic Stabilization

High employment, rising output of goods and services, and relatively stable prices are three widely accepted national economic goals. Responsibility for economic stabilization actions to meet these goals has been assigned to monetary and fiscal authorities. The Federal Reserve System has the major responsibility for monetary management. Fiscal actions involve Federal Government spending plans and taxing provisions. Governmental units involved in fiscal actions are the Congress and the Administration, including the Treasury, the Bureau of the Budget, and the Council of Economic Advisers.

Different Measures of Corporate Profits

CORPORATE PROFITS have been receiving increased attention from economists in recent years, reflecting a widening recognition of their significance in the performance of the economy. Profits provide incentive for business capital investment at the same time that, in the form of retained earnings, they provide much of the savings needed to finance investment; thus profits and the economy's ability to grow are intimately related. Profits also provide a major portion of the revenues needed to support Federal Government spending; hence fluctuations in profits can make the difference between a budgetary surplus and deficit.

The Scope of Government Spending

A number of definitions of the scope of federal government spending have already been developed in the course of preparing various official series on government expenditures or purchases. Each of these definitions is useful for certain purposes. Each measure, from a separate point of view, draws at a different place and in a different way the line between the transactions which are included in the measure of government spending and those which are not. Cash Withdrawals. The Daily Statement of the United States Treasury reports the amount of cash withdrawals from the Treasury, other than public debt transactions. This measure includes the expenditures of all wholly-owned federal government agencies and enterprises (plus the social insurance and other trust funds they administer) which clear through the United States Treasury. This measure essentially reports the disbursements of those agencies for which the Treasury acts as banker. Federal agency transactions through commercial and other private banking facilities are not covered. In effect, this excludes most of the operations of government-sponsored enterprises, such as the Federal Deposit Insurance Corporation and the Federal Land Banks, which maintain accounts at commerical banks. The series on cash withdrawals is the only measure of federal government spending which is available on a daily basis. Budget Expenditures. The central series in the annual budget document, budget expenditures include the transactions of all wholly-owned federal government agencies. Trust funds and government-sponsored enterprises, which deal in various degrees with funds not owned by the federal government, are omitted. Cash Payments. The annual budget contains a special measure of federal government payments to the public, the so-called consolidated-cash series on government expenditures. This series includes the transactions of wholly-owned agencies as well as trust funds and some government-sponsored enterprises. It is rather an eclectic, pragmatic series whose scope is never defined except by inventorying of its coverage. In general, all of the agencies whose funds are appropriated or controlled by the Congress or the President are included. Some partially-owned and other government-sponsored enterprises which, at least in the past, were subject to budgetary control are also included, such as the Federal Home Loan Banks and the Federal Land Banks. The Federal Reserve System, however, is excluded.