Partisan Politics, Divided Government, and the Economy (Political Economy of Institutions and Decisions)

This book explores how the political process in the United States influences the economy and how economic conditions influence electoral results. It explains how the interaction between the President and Congress lead to the formulation of macroeconomic policy and how the American voters achieve moderation by balancing the two institutions. Fluctuations in economic growth are shown to depend on the results of elections and, conversely, electoral results to depend on the state of the economy. The final chapter of the book establishes striking similarities between the American political economy and other industrial democracies. This book develops an integrated approach to understanding the American economy and national elections. Economic policy is generally seen as the result of a compromise between the President and Congress. Because Democrats and Republicans usually maintain polarized preferences on policy, middle-of-the-road voters seek to balance the President by reinforcing in Congress the party not holding the White House. This balancing leads, always, to relatively moderate policies and, frequently, to divided government. The authors first outline the rational partisan business cycle, where Republican administrations begin with recession, and Democratic administrations with expansions, and next the midterm cycle, where the President's party loses votes in the mid-term congressional election. The book argues that both cycles are the result of uncertainty about the outcome of presidential elections. Other topics covered include retrospective voting on the economy, coat-tails, and incumbency advantage. A final chapter shows how the analysis sheds light on the economies and political processes of other industrial democracies. This book develops an integrated approach to understanding the American economy and national elections. Economic policy is generally seen as the result of a compromise between the President and Congress. Because Democrats and Republicans usually maintain polarised preferences on policy, middle-of-the-road voters seek to balance the President by reinforcing in Congress the party not holding the White House. This balancing leads, always, to relatively moderate policies and, frequently, to divided government. The authors outline the rational partisan business cycle, where Republican administrations begin with recessions, and Democratic ones with expansions, and the midterm cycle, where the President's party loses votes in the midterm congressional election. The book argues that both cycles are the result of uncertainty about the outcome of presidential elections. Other topics covered include retrospective voting on the economy, coat-tails, and incumbency advantage Cover......Page 1 Frontmatter......Page 4 Contents......Page 10 List of tables, figures, and boxes......Page 11 Series editors' preface......Page 14 Acknowledgments......Page 15 PARTISAN POLITICS, DIVIDED GOVERNMENT, AND THE ECONOMY......Page 18 1 - Introduction......Page 20 2 - Models of policy divergence......Page 35 3 - A theory of institutional balancing......Page 62 Appendix to chapter 3......Page 92 4 - The midterm cycle......Page 102 Appendix to chapter 4......Page 126 5 - Diversity, persistence, and mobility......Page 140 6 - Incumbency and moderation......Page 156 7 - Partisan business cycles......Page 180 8 - The president, Congress, and the economy......Page 207 9 - Economic growth and national elections in the United States: 1915--1988......Page 223 Appendix to chapter 9......Page 260 10 - Partisan economic policy and divided government in parliamentary democracies......Page 262 References......Page 279 Index......Page 291 Integrates economics and politics, theory and econometrics, to provide the first coherent and general formal model of US political economy. Addresses formal tests of rationality in voting behaviour and rational voter behaviour when the executive and legislature are chosen simultaneously. Blends game theory, macroeconomics, voting theory, and econometrics. Alberto Alesina And Howard Rosenthal. Includes Bibliographical References (p. 260-271) And Index.