Working Paper: NBER ID: w2531
Authors: Douglas Holtz-Eakin
Abstract: Recent proposals assume that endowing the U.S. President with a line item veto will reduce spending. Analysis of a rich set of state budget data indicates that long run budgets are not altered by an item veto. In the short run, the item veto's potency is contingent upon the political setting. 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 adoption of the line item veto, in general, is unlikely to reduce the size of the federal government.
Keywords: line item veto; public sector budgets; state governments
JEL Codes: H11; H72
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| line item veto (H61) | long-run budgetary behavior (E62) |
| line item veto (H61) | budgetary package (H61) |
| line item veto + opposing party control (D72) | budget deficits (H62) |
| Democratic governors + line item veto (H79) | current spending (H61) |
| Republican governors + line item veto (H79) | capital outlays (G31) |
| minority governors + ability to sustain veto (D72) | budget outcomes (H68) |
| minority governors + ability to sustain veto (D72) | current expenditures (H72) |
| minority governors + ability to sustain veto (D72) | grants-in-aid (H77) |