Why Does Government Spending Increase Under Term Limits?

by on December 17, 2012 at 6:03 am in Political Science | Permalink

Many thanks to Alex for introducing me yesterday. Having written several papers on term limits, I will use my first post of the week to raise a new question that has emerged from this aging policy intervention: Why does government spending increase under term limits?

Back in the 1990s, when about half the states’ voters slapped term limits on their state legislators, the idea was to rein in government spending and decrease the growth of government. Instead, spending per capita increased in those states relative to states without term limits. See this empirical paper, this survey article, or this book this book for details.

These results are counterintuitive insofar as we put stock in the intended mechanism, which was simple: As legislators spend more time in office, they tend to vote for more government spending – so if legislators are required by law to spend less time in office, they’ll spend less money.

There are two problems with this. First, the premise that tenure and spending positively correlate has not held up to empirical scrutiny. Most papers found no positive link between tenure and spending, although a few reported small effects.

Besides, even if there were a strong tenure-spending correlation without term limits, that correlation is not likely to hold up once term limits are imposed. This is due to a version of the Lucas Critique (or Goodhart’s Law), which in general argues that observed behavioral patterns are not invariant to policy interventions. In this case, term limits will change the dynamics between voters and politicians in ways that lead to greater spending. More specifically, three explanations seem plausible.

  1. Term limitation exacerbates fiscal commons problems within the legislature. Because term limits decrease the variance of tenure within a legislature, the relative power of party leaders and ranking committee members will decrease. As the distribution of power flattens, this increases the proportion of legislators who possess access rights to budget items, thus decreasing the control rights that a relatively few leaders and committee chairs would otherwise have. When everyone can get their pet project through, more projects get through.
  2. Term limits shorten legislators’ time horizons. If legislators use their time in office to advance their careers, and if the career-value of being in the statehouse increases with the support of more spending, then term limits can impart an incentive to spend more and sooner. For example, rank-and-file legislators support more spending to secure leadership positions, and leaders let more projects through in order to quickly build durable coalitions.
  3. Term limits might lure legislators into very wasteful forms of pork spending, according to this paper by Michael Herron and Kenneth Shotts:

Term limits can, in some cases, inhibit voters from selecting representatives who deliver particularistic benefits, and, in these cases, term limits reduce pork spending. On the other hand, when pork is extremely socially inefficient, representatives who want to deliver pork to their districts have incentives to refrain from doing so to reduce future pork in other districts. In this scenario, term limits actually prevent legislators from promoting future spending moderation and thus paradoxically increase pork spending.

These explanations can, of course, be mutually inclusive. I suspect there is more to #1 and #2, if only because they are more salient.

In general, term limits increase spending because voters and legislators rationally respond to changes in their institutional environment. As this question invites further study, good papers will unpack the specific mechanisms that drive those responses.

— Notes: Since most people seem surprised by the actual effects of term limits, here are pointers to similar findings: Gubernatorial term limits worsen fiscal volatility — this paper (co-authored by my co-author Pete Calcagno) and this paper (by my dissertation advisor Bob Tollison) — because governors invest less in reputation (this paper). States with legislative term limits might also have worse bond ratings (here). Here on MR, neither Alex nor Tyler have put much stock in term limits, though Alex is less skeptical.

prior_approval December 17, 2012 at 7:10 am

And here I was thinking it would just made the revolving door spin faster – after all, someone interested in money has a slightly different perspective than someone interested in power (at least in the old fashioned sense of how DC and NYC were two completely cultures in terms of what motivated them – particularly in regards to such organizations as the military or NIH). And with terms limits providing a cap to those wishing to exercise power for its own sake, the number of people who know how the revolving door works will use elected office as a way to enrich themselves.

Something that those giving and receiving government funds can agree on, much like America’s two political parties can always agree on ensuring no third party emerges. After all, the companies receiving government funds favor a system where they continue to receive them, being more than willing to back those politicians more interested in money than power. Especially when those politicians more interested in power are no longer able to provide a certain balancing function to the structure.

The Other Jim December 17, 2012 at 7:30 am

>the idea was to rein in government spending

But you’ve blown it in your opening sentence, rendering your entire post moot.

This was never, ever “the idea.” The idea is, and has always been, to reduce corruption. Try again.

Andrew' December 17, 2012 at 11:46 am

A tad dismissive over something that apparently achieved publication. OTOH, I always thought the partisan arguments against term limits missed the point. At least this tells us that we were right. Term limits didn’t mean a bunch of conservatives took over.

Rahul December 17, 2012 at 7:31 am

I question the premise that controlling spending was the prime objective behind term limits.

Andrew' December 17, 2012 at 8:14 am

Me too, I don’t remember, but I also question questioning the premise. If size/spending is everything then it is the thing.

liberalarts December 17, 2012 at 7:46 am

I agree with the above comments. The GOP embraced a term limits agenda in the early 90s when it was the congressional minority and the Democratic Party was thought to have a near permanent lock on the house. And especially the last group of southern democrats to could booted out of office with term limits to be replaced by GOP reps. After the GOP sweep of 1994, that problem was no more and the GOP largely dropped the issue.

Andrew' December 17, 2012 at 8:15 am

Not exactly, I think. I have heard several and talked to at least two Republican Congressmen who voluntarily term-limited themselves. They didn’t seem to be aware that voluntary term limits were different from mandated term limits.

libert December 17, 2012 at 8:43 am

Term limits also reduce the expertise that legislators have in policy issues. Lacking such expertise, legislators outsource that the act of writing legislation to lobbyists, who tend to know the issues better.

This raises the power of interest groups relative to the general population, making the “concentrated benefits, diffuse costs” problem much worse.

Bill December 17, 2012 at 9:32 am

Funny thing.

If you read the article, what it says is:

“Despite these claims, the relationship betweeen tenure in office and spending remains unclear.” (p 4).

Ted Craig December 17, 2012 at 9:50 am

4. Term limits generate more lobbyists?

Alex December 17, 2012 at 10:07 am

Any difference between states with strict term limits and those like Virginia where the governor can be reelected but not in consecutive terms?

tomhynes December 17, 2012 at 10:08 am

If you only hold a property for a limited time, extract as many resources as you can during that time period.

Rahul December 17, 2012 at 10:28 am

The “term-limited” sample has only 11 states and over 5 years whereas the baseline has 36 states over ~20 years.

What’s the statistical chance that a random group of 11 states shows a 1% variation over the rest? Was wondering if this is mostly an artifact.

derek December 17, 2012 at 10:33 am

Term limits take power away from the individual representatives, they are replaceable drones, and gives it to the party apparatus. The individual representatives cannot build the infrastructure necessary to insure re-election, they are fully dependent on the party machine. When it comes time to vote on a money bill, they will line up and do the bidding of the party.

This is why most proportional representation systems don’t work very well. Many of them are designed to empower parties. The magic of democracy is the ability to get rid of leaders, so by definition a system that entrenches power in an unaccountable structure will lack that magic and be indistinguishable from an authoritarian dictatorship. Hence the vile party machine politics that we see in some states or cities.

DocMerlin December 17, 2012 at 10:55 am

Game theory says that this is the result we should expect.
If the game has a near guaranteed ending then the player has nothing to lose by voting for what they want as opposed to what their constituents want.

mulp December 17, 2012 at 7:50 pm

You are saying voters do not want the roads fixed in front of their house, a better school for their kids, a better nursing home for their grandparent, more police to keep them safe from fear, more prisons to lock up the kid down the street who sells drugs to your kid, more corporate welfare to bring a factory/warehouse/prison/datacenter to your town to give some people jobs so they can get hair cuts and buy food so more $10/hr jobs are kept in the community?

Name all the things government provides you want stopped or privatized so you buy them directly. The police. The roads turned to tollways, The fire department privatized. The private prison jailing only the prisoners that pay their way or that the victims pay to keep jailed. Poor houses that you pay to keep grandma and when you can pay for her they sell her organs.

If you are only in office for a few years, you don’t want to create problems with dealing with voters or businesses so you never cut anything because your constituents will scream at you, and you obviously want to cut taxes. You do exactly what the voters want which is hand out free lunches.

Hadur December 17, 2012 at 11:46 am

Isn’t it well-established that corporate executives who operate on short time windows make terrible decisions? Why should it be a surprise when we give legislators a short time window to operate on?

Jeff Fisher December 17, 2012 at 1:26 pm

Modern nations and governments are too complex to be managed by newbies or part timers.

Therefore if you require that all your elected representatives be newbies and/or part timers you ensure that your elected representatives are not managing the government.

Harder to predict who will end up running things.

Art De Vany December 20, 2012 at 4:51 pm

Nations and governments are not managed. Complex systems are not manageable. It is important to set the initial conditions and certain boundaries on the dynamics, but that is the most one can do. A term limit boundary changes the dynamics, whether that leads to a better result no one can say. If you look at government spending you see a chaotic series with the driver of baseline spending. Our representatives do not and cannot manage the government. Government is unmanageable. So is a decentralized economy.

NL7 December 17, 2012 at 2:39 pm

It’s also important to remember that government is far more than just the elected leaders. It’s also legislative and executive staffers, bureaucrats, advisors, political parties, lobbyists, and pressure groups. If elected leaders have less presence and less chance to build up long reputation, their power goes down, but the power of government is not directly restrained. The main effect is that staffers, parties, bureaucrats and lobbyists jostle for power to influence legislators.

The legislators are generally new in town and may only be around for 6 to 12 years, so in any given year tons of them are new or relatively new. They rely more heavily on their staffers, who typically have much more experience, and on their parties and pressure groups to understand how to vote. And since term limits increase the pressure and competition for seats (e.g. everyone fighting to move from lower house to upper house), there is more incentive to play ball with the kingmakers in the parties and the pressure groups.

This is all evident in California, where I spent a thankfully brief time in state politics. I’m very sympathetic to the impulse for term limits, but my exposure to California politics is that it just shifts more power to unelected players and increases the political tension since everybody has to move fast to earn a promotion. Also, a lot of the same elected politicians just jump from job to job, state legislature or statewide office, hoping to finally grab a House seat so they can relax.

dw December 17, 2012 at 3:19 pm

The argument that term limits would reduce the power of special interests was just a smoke screen to hide the real agenda. Legislative term limits in California were instituted to reduce the power of the Democratic legislature vis a vis the Republican governor and to reduce the power of those districts with long-term representatives in favor of the those districts with recent incumbents.

Similar reasons hold in other cases where term limits were instituted. The 22nd Amendment that reduced the number of terms a president could serve occurred after Roosevelt, a Democrat, had been re-elected for 4 terms. It was passed by a Republican controlled Congress and legislatures that were heavily Republican. Note that the 22nd Amendment did not impose term limits on Congress. See “Why Voters Vote for Incumbents but Against Incumbency: A Rational Choice Explanation,” D. Friedman and D. Wittman, Journal of Public Economics, 67-83 (1995)

Parrish Hirasaki December 17, 2012 at 4:14 pm

Maybe it is that people who have been in office a long time put less effort into getting anything done. I support term limits to get fresh people with fresh ideas. Also to get fresh warriors to tackle problems that are not being addressed because the long-serving get battle weary and give up.

wd40 December 17, 2012 at 4:59 pm

You do not need term limits to solve this or similar problems. The voters can vote their representative out of office if they think that their representative is battle weary.

Sam December 17, 2012 at 8:49 pm

On the national level, Canadian Prime Ministers have no term limits. Chretien eliminated the deficit in his first parliament and stayed PM for a decade including two more elections.

Term limits have always struck me as highly undemocratic. They only keep out the ones that stand a chance of re-election.

Willitts December 17, 2012 at 9:43 pm

There are also term limits in staunchly liberal places like San Francisco where the mayor and all of the city council members are term limited.

I doubt the motive for the term limits was spending cuts, and I doubt more that itwas to limit the stranglehold of Democrats.

wd40 December 17, 2012 at 11:22 pm

Term limits is a tool that can be used by any group (including Democrats) to limit the power of another group. In San Francisco, a 2-term limit on the mayor was instituted in 1955, while the city council member terms were not limited until 1990. Why not all at once? I suspect that there were different coalitions at these different times. Unfortunately, I do not have all the details to provide a coherent answer to the question, but here is an interesting fact. Elmer Robinson, the mayor of San Francisco, had been serving since 1948 when the term limits for mayor was enacted in 1955. Robinson was a Republican and so was George Christopher, the mayor who succeeded him.

Paul Bogle December 17, 2012 at 10:40 pm

The bicameral architecture of the US system as created was to have one body directly representing the people and the other representing the interests of the states. By making the Senate a body directly elected by the people but composed along the undemocratic equal weighting of states without regard to population, we have created a class of super-legislators able to buy and sell all manner of interests. My hope for term limits is a prophylactic one, reducing opportunity for influence pedaling by entrenched Senators. Returning the power of appointment to the states would be preferable but far less likely to happen than limiting terms.

With all due respect to the late Senator, is anyone really going to try to argue that the quality of governance in the US would have suffered without the parliamentary skill of Robert Bird? We are a big nation with many qualified people. I see very little evidence that the leadership in either party in either Congressional body is irreplaceable. More turnover in Congress is likely to result in more issues being addressed. I’m circumspect of such an outcome as legislative action is a double-edged sword. If the trade-off is reduced corruption/cronyism, I’m willing to take the risk.

Art De Vany December 20, 2012 at 4:42 pm

Spending during the tenure of the office-holder is too narrow a window. The data do not show any relationship because the spending during the term is not all the spending the office-holder votes for. A vote can pass legislation that spends for many years.

It is the coalitions that are afforded under long tenure that corrupt the system. The ability to form lasting coalitions with other office-holders is weakened by term limits. So is the incentive to enter office. Most people who enter office want to make changes that they see as beneficial and then become part of the system that perpetuates itself. If they saw a term limit, they have stronger incentives to vote for the changes that caused them to be attracted to office.
And, there are also the opportunities available after time in office that provide poor incentives. Look at the appointments that are made to regulatory boards, see work by my friend, Ross Eckert on the composition of the FTC.
In the end, it is a mild form of corruption that is impossible to stop, but it can be made less rewarding to spend and log roll if you face a shorter horizon. The end-period problem, it seems, would unravel the incentives to cooperate with other office-holders back to the initial term in office.

chemietoilette January 2, 2013 at 11:31 am

What’s up, after reading this remarkable article i am as well glad to share my knowledge here with mates.

Comments on this entry are closed.

Previous post:

Next post: