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Wednesday, January 03, 2007

Appropriations bills and political structure

Every year the U.S. Congress is charged with passing 13 appropriations bills, funding everything from Actuarial Tables to Zebra Cloning. Every year there is a long debate (or sometimes not so long) and one or more of the appropriations bills are not passed. This in turn requires continuing resolutions, threats to "shut down the government" and other saber rattling to pass spending bills that one side favors over other spending bills the other side favors.

I sometimes wonder why we make/made fun of the 5 year plans of the Soviets. We have five and ten year plans as well, and we change them every year just like the Soviets did. Nevertheless, there is likely some variables that correlate with more appropriations bills passing on time (which, admittedly, might be less welcomed by some).

This report includes information on the number of appropriations bills that passed on time from 1977 through 2006. The average number of bills passed on time is 3.33 and four times in the past 30 years have all thirteen appropriations bills passed on time.

My priors would be as follows. As the federal government tries to spend more, it is harder for people to agree on what to spend the money on. With more money being spent, the fewer appropriations bills that will pass on time. If the president is a Republican, there might be fewer bills passed if the Republican president's budget contains spending (or lack thereof) that is counter to the wishes of the House membership. If the government is split, that is the president and the House are of different parties, a sense of bipartisanship might take over as one party doesn't "over reach" and try to do too much (either spending or lack of spending). Finally, if the government is running a surplus, there will be more motivation to spend the surplus which will reduce the timeliness of appropriations bills passing. Finally, if it is a presidential election, the Congress might drag their feet in passing bills until after the November election in a power play against the Executive branch.

I gathered the appropriations data from here, federal inflows and outflows data from the Economic Report of the President, and constructed the remaining variables. I estimated a Negative Binomial model, which is appropriate for count data with overdispersion.

Here are the raw estimation results using 30 years of data from 1977 through 2006:

Negative binomial regression Number of obs = 30
LR chi2(5) = 8.93
Dispersion = mean Prob > chi2 = 0.1121
Log likelihood = -65.260244 Pseudo R2 = 0.0640

------------------------------------------------------------------------------
ontime | Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
pergdpspent | -.4738451 .2563219 -1.85 0.065 -.9762269 .0285366
presrepub | -.9250656 .5492236 -1.68 0.092 -2.001524 .1513928
splitgovt | 1.159452 .56216 2.06 0.039 .0576389 2.261266
surplusyes | -2.70796 1.070477 -2.53 0.011 -4.806055 -.6098643
preselection | .0581775 .5124171 0.11 0.910 -.9461416 1.062497
_cons | 11.04024 5.274247 2.09 0.036 .7029041 21.37757
-------------+----------------------------------------------------------------
/lnalpha | -.120064 .4033192 -.9105551 .6704271
-------------+----------------------------------------------------------------
alpha | .8868637 .3576891 .4023008 1.955072
------------------------------------------------------------------------------
Likelihood-ratio test of alpha=0: chibar2(01) = 32.52 Prob>=chibar2 = 0.000

The variable pergdpspent measures the percentage of U.S. GDP the federal government spends (both on and off budget), presrepub equals one if the President is Republican, splitgovt equals one if the House and President are of different parties, suplusyes equals one if there is a (paper) surplus at the federal level, and preselection equals one if it is a presidential election.

The results suggest that as the Federal government spends more (as a percentage of GDP), fewer appropriations bills are passed on time. Likewise, a Republican president will have fewer appropriations bills passed ontime. A split government correlates with more timely bills passed, a federal surplus correlates wtih fewer bills passed on a timely basis, and a presidential election doesn't seem to matter that much.

The parameter estimates are hard to interpret in the negative binomial model - only the signs are useful. Therefore, I calculated the marginal effects of the variables at the sample means and obtained the following:

Marginal effects after nbreg
y = predicted number of events (predict)
= 2.7064052
------------------------------------------------------------------------------
variable | dy/dx Std. Err. z P>|z| [ 95% C.I. ] X
---------+--------------------------------------------------------------------
perout | -1.282417 .71912 -1.78 0.075 -2.69186 .12703 20.9247
presrep*| -2.845226 2.01173 -1.41 0.157 -6.78815 1.0977 .6
split*| 2.733892 1.29394 2.11 0.035 .197814 5.26997 .666667
surplu~s*| -3.62438 1.0278 -3.53 0.000 -5.63882 -1.60994 .133333
presel~n*| .1599363 1.43076 0.11 0.911 -2.6443 2.96418 .233333
------------------------------------------------------------------------------
(*) dy/dx is for discrete change of dummy variable from 0 to 1

Evaluated at the sample means, a one percentage point increase in the spending as a percentage of GDP will reduce the number of bills by 1.3. A Republican president averages approximately 3 fewer timely appropriations bills. A split government, however, will typically have three more bills passed on a timely basis. A federal surplus reduces the number of timely bills by 3.6 and a presidential election does not correspond to any sizeable change in the number of bills passed on a timely basis.

As the Democrat party takes control of the Congress tomorrow/today, it is perhaps useful to have some historical perspective on what has happened with federal spending bills over the past three decades. In the next few months we can see if the Democrat congress is doing more or less than the historical average would suggest.

I am taking off for Chicago for the AEA's tomorrow. No blogging on HL until next Monday...

Peace out.

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