“Pick Your Poison: Do Politicians Regulate When They Canʼt Spend?”

From Noel Johnson, Matthew Mitchell, and Steven Yamarik:

We investigate whether laws restricting fiscal policies across U.S. states lead politicians to regulate more instead. We first show that partisan policy outcomes do exist across U.S. states, with Republicans cutting taxes and spending and Democrats raising them. We then demonstrate that these partisan policy outcomes are moderated in states with no-carry restrictions on public deficits. Lastly, we test whether unified Republican or Democratic state governments regulate more when constrained by no-carry restrictions. We find no-carry laws restrict partisan fiscal outcomes but tend to lead to more-partisan regulatory outcomes.

The presentation slides are here.  In my view this is one reason of many why a balanced budget amendment is not a workable path toward fiscal conservatism. 


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