This paper addresses the following question: what determines government spending in the United States. In short, I believe real government spending to be a function of partisan political control. Specifically, I hypothesizes that a majority congressional representation by either the Democrats or the Republicans does not affect the level real federal government spending. In other words, government spending does not increase due to a Democrat majority or decline due to a Republican majority.
Every two years on the first Tuesday in November, Americans across the country vote on who will represent them in the Federal government. Thusly, they indirectly shape the future of the United States. Since the mid-nineteenth century, Americans have become increasingly polarized into two distinct political parties, the Democrat and Republican parties. Does electing one party into majority imply an overall decrease in federal spending, or does each party spend relatively the same amount overall simply focusing on defensive outlays over non-defensive or vice-versa? This paper primarily seeks to address whether the share of congressional representation affects total real federal spending.
Government spending should be the most studied component of GDP. Currently, federal spending accounts for approximately 20% of GDP (Lazear 2010). Economists and legislators are in disagreement as the exact effects of government spending. Moreover, proposed legislation is “being judged not by their impact on spending and taxation, but by their projected effect on the deficit” (Lazear 2010). This is evident by a $1.6 trillion project deficit this year (Reddy 2010). Even the current Chairman of the Federal Reserve, Be...
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...Real Gross Domestic Product. March 16, 2010.
Ferreira, Fernando, and Joseph Gyourko (2009). "Do Political Parties Matter? Evidence from U.S. Cities." The Quarterly Journal of Economics 124, no. 1: 399-422.
Lazear, Edward P. "The Spending 'Freeze' That Isn't." The Wallstreet Journal, January 27, 2010.
Office of the Clerk. Party Division of the House of Representatives (1989 to Present). http://clerk.house.gov/art_history/house_history/partyDiv.html (accessed February 13, 2010).
Olive, Ronald W. "Stocks Go Down When Government Spending Goes Up." The Wallstreet Journal, March 23, 2009.
Reddy, Sudeep. "Bernanke Says Deficit Action Is Key." The Wallstreet Journal, February 26, 2010.
The United States Senate. Party Division in the Senate, 1789-Present. http://www.senate.gov/pagelayout/history/one_item_and_teasers/partydiv.htm (accessed February 13, 2010).
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