Separation of Powers and New Public Spending

Kaj Thomsson (Maastricht University)
Alessandro Bonatti (MIT)

Abstract: We develop a model of American legislative politics, and we use this model to explain the shape of new public spending programs. In the model, the distribution of federal funds across regions of the country is the outcome of a bargaining game in which the President acts as the agenda-setter and Congress bargains over the final shape of the spending bill. The model highlights the importance of the American president being independently elected, which leads to a more balanced spending outcome than if proposal power was allocated to some member of Congress. In addition, we use our model to demonstrate the importance of the institutional rules within Congress, in particular its bicameral structure and the sequentiality of the legislative process. We then apply the model to the New Deal; in this context the model suggests, among other things, that both economic and political concerns were behind the shape of the New Deal spending, and that a less politically minded President would have been less constrained by Congress.