How Incumbents in Washington Hurt the Economy - Miller-McCune
Researchers looking at federal government spending on states discover that having a powerful, long-tenured legislator in D.C. actually hurts the local economy.
Conventional wisdom suggests that states are better-served in Washington by elected officials who can stay there long enough to accumulate power, get things done, and funnel home some of that government largesse. The longer an incumbent serves, the higher he or she rises in party ranks, and the more likely constituents will benefit. (The people of Maine, for instance, may be bigger losers than the GOP following the retirement announcement this week of long-serving and well-respected Senator Olympia Snowe.)
There is new research, however, that suggests really powerful politicians may actually have a negative impact on their state economies back home. To explain how the researchers arrived at this counterintuitive conclusion, it’s helpful to start from the beginning.
“The hypothesis was essentially to test the impact of government spending on economic activity. We didn’t know which way that was going to go,” said Chris Malloy, an associate professor at the Harvard Business School and one of the study’s authors. Would government spending help local businesses or hurt them? And how do you know what results are attributable to the economy itself and which are caused by the influx of government cash?
“The experiment you want to run is what if you randomly just dropped cash onto a country or a state,” Malloy said. “What would happen?”
He and his co-authors Lauren Cohen and Joshua Coval eventually realized there is a real-life scenario that mimics this cash-drop-from-a-helicopter: it’s basically what happens when an incumbent ascends to a powerful committee chairmanship in Washington.
Politicians who chair the most influential committees — such as Finance and Appropriations in the Senate or Ways and Means and Appropriations in the House - have the greatest ability to funnel earmarks and government contracts to their constituents. Chairmanships are given to the most senior elected official on a committee in whichever party currently controls the House or Senate. This means the positions shuffle every time a committee chair retires, or loses an election, or if the entire chamber changes parties - but not because of anything to do with the economy back home.
“It’s completely unrelated to anything happening to your state when a guy in Montana steps down,” Malloy said. “That has nothing to do with the economic activity in your state when you’re in Mississippi.”
This scenario presents researchers with the opportunity to look at the economic impact at the state level of what happens when federal money suddenly floods in (and for reasons that have nothing to do with, say, stimulus during a recession).