ALBERT

Notes: Conclusions and implications We do not claim to have provided a comprehensive view of tax-funded politics, but only to suggest that it is an important political phenomenon. There are hundreds of taxpayer-financed lobbying organizations, many of them so well organized that they have published books on ‘networking.’ The importance of tax-funded politics is also evident in the creation of the Washington, D.C.-based ‘OMB Watch.’ During the early 1980s, when the federal Office of Management and Budget (OMB) made an effort to enforce federal laws against tax-funded politics, the tax-funded political network responded with strong opposition. The Washington Post reported: ‘OMB Watch was... started by a coalition of anxiety-ridden nonprofit groups concerned about an OMB proposal to ensure that government-funded organizations did not lobby with government funds.’ Reportedly, OMB Watch has over 1,000 member-organizations; according to one of its directors, ‘If not 100 percent, at least 90 percent of our members are federal grantees’ (Barringer, 1984). One economic implication of tax-funded politics is that it makes it quicker and easier to secure wealth transfers through the aegis of the state, thereby facilitating the process of rent seeking. Because the practice helps protect incumbents, tax-funded politics may also render government more monopolistic. Congressional incumbents are ultimately responsible for all expenditures, and they benefit politically from illegal tax-funded politics. By subsidizing their interest-group allies, they help assure their own reelection. We believe this is one reason why there is so little turnover in Congress; in the 1984 national elections, for instance, 95 percent of all incumbents in the House and Senate were re-elected. Tax-funded politics, along with the proliferation of subcommittees and congressional staff and the franking privilege, make it more costly for challengers to compete. The amounts of the grants discussed in this paper are in the hundreds of millions of dollars, but such amounts may seem trivial when compared to a trillion dollar federal budget. We must remember, however, that funds spent on tax-funded politics are an important element of the political process, not because of their absolute amount but because of the political and economic effects they engender. In the 1984 congressional elections, total campaign spending by all House and Senate candidates, incumbents and challengers, was about $375 million. This amount is only a fraction of the total spent on tax-funded politics in recent years. If $375 million in campaign spending can affect political outcomes and, ultimately, public policy, then several times that amount devoted to tax-funded politics is also likely to have an effect. We hope we have stimulated interest in further research on what we believe to be an important political phenomenon.

Notes: Summary and conclusions This paper has examined the voting behavior of bureaucrats and the consequences for elections. The economic theory of the rational voter predicts that bureaucrats would have more to gain by voting than the general public. The cost of voting is lower for public employees than for those who work in the private sector. As a consequence, theory predicts that bureaucrats would participate in elections at a greater rate than other individuals. As a test of the validity of the economic theory of voting, an empirical analysis of national elections from 1964 to 1978 was presented. The evidence is drawn from household survey data published by the U.S. Bureau of the Census. The data permit a direct observation of voting participation rates of public and private employees. The empirical results indicate that bureaucrats consistently participate in elections at significantly greater rates than non-bureaucrats. As the public sector expands and voter participation rates remain low, bureaucrats will exert disproportionate influence on election outcomes.

Notes: 3. Summary and conclusions This paper has demonstrated that the tax revolt of the 1970s has not been as successful in reducing the level of state and local government expenditure as preliminary empirical findings indicate, and that the rate of increase in state and local public spending is likely to be far greater than previously believed. The evidence presented here shows clearly that constitutional and statutory limitations on the taxing and spending powers of local governments have led to a massive amount of off-budget spending and borrowing. The debt issued by off-budget enterprises is larger and growing at a much faster rate than the voter-approved debt issued by state and local governments, and has been since 1975. Thus, even though statistics on property taxation and expenditure may indicate a slow-down in the growth of local taxation, the true cost of local government may continue to increase at previous rates, although this is an empirical question which we are not yet able to address. Off-budget enterprises are heavily subsidized by local, state, and federal governments. These subsidies represent a hidden tax liability to present and future generations of taxpayers. In addition, the debt and expenditures of OBEs contribute substantially to the crowding-out of private spending and investment.