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The Line Item Veto and Public Sector Budgets: Evidence from the States

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  • Douglas Holtz-Eakin
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    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.

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    File URL: http://www.nber.org/papers/w2531.pdf
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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2531.

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    Date of creation: Mar 1988
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    Publication status: published as "The Line Item Veto and Public Sector Budgets: Evidence from the States," Journal of Public Economics, vol. 36, pp. 269-292, 1988.
    Handle: RePEc:nbr:nberwo:2531

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    1. Daniel R. Feenberg & Harvey S. Rosen, 1986. "Tax Structure and Public Sector Growth," NBER Working Papers 2020, National Bureau of Economic Research, Inc.
    2. Steven G. Craig & Robert P. Inman, 1985. "Education, Welfare, and the "New" Federalism: State Budgeting in a Federalist Public Economy," NBER Working Papers 1562, National Bureau of Economic Research, Inc.
    3. Dennis Mueller & Peter Murrell, 1986. "Interest groups and the size of government," Public Choice, Springer, Springer, vol. 48(2), pages 125-145, January.
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    Cited by:
    1. Arnt Ove Hopland, 2012. "Central government control and fiscal adjustment : Norwegian evidence," Working Paper Series, Department of Economics, Norwegian University of Science and Technology 13812, Department of Economics, Norwegian University of Science and Technology.
    2. Toke Aidt & Francesco Giovannoni, 2011. "Critical decisions and constitutional rules," Social Choice and Welfare, Springer, Springer, vol. 37(2), pages 219-268, July.
    3. Timothy J. Besley & Harvey S. Rosen, 1999. "Vertical Externalities in Tax Setting: Evidence from Gasoline and Cigarettes," NBER Working Papers 6517, National Bureau of Economic Research, Inc.
    4. Dearden, James A & Husted, Thomas A, 1993. " Do Governors Get What They Want?: An Alternative Examination of the Line-Item Veto," Public Choice, Springer, Springer, vol. 77(4), pages 707-23, December.
    5. George Crowley, 2012. "Spatial dependence in constitutional constraints: the case of US states," Constitutional Political Economy, Springer, Springer, vol. 23(2), pages 134-165, June.
    6. Christian Bj�rnskov & Niklas Potrafke, 2012. "Political Ideology and Economic Freedom Across Canadian Provinces," Eastern Economic Journal, Palgrave Macmillan, vol. 38(2), pages 143-166.
    7. Heinemann, Friedrich & Osterloh, Steffen & Kalb, Alexander, 2013. "Sovereign risk premia: The link between fiscal rules and stability culture," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 13-016, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    8. James Poterba, 1992. "Capital Budgets, Borrowing Rules, and State Capital Spending," NBER Working Papers 4235, National Bureau of Economic Research, Inc.
    9. Henning Bohn & Robert P. Inman, 1996. "Balanced Budget Rules and Public Deficits: Evidence from the U.S. States," NBER Working Papers 5533, National Bureau of Economic Research, Inc.
    10. Francesc Pujol, 2009. "Measuring US Presidents Political Commitment for Fiscal Discipline between 1920 and 2008," Faculty Working Papers, School of Economics and Business Administration, University of Navarra 01/09, School of Economics and Business Administration, University of Navarra.
    11. Reza Baqir, 2001. "Government Spending, Legislature Size, and the Executive Veto," IMF Working Papers 01/208, International Monetary Fund.
    12. James M. Poterba, 1996. "Do Budget Rules Work?," NBER Working Papers 5550, National Bureau of Economic Research, Inc.
    13. Francesco Lagona & Fabio Padovano, 2007. "A nonlinear principal component analysis of the relationship between budget rules and fiscal performance in the European Union," Public Choice, Springer, Springer, vol. 130(3), pages 401-436, March.
    14. Vincent C. Blackburn & Richard Gerlach & Vasilis Sarafidis, 2007. "Dynamic Budgetary Adjustments in the Australian State Government Finance Sector: An Econometric Approach," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, College of Business, Feng Chia University, Taiwan, vol. 3(2), pages 125-159, July.

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