The midterm elections are over. Finally. What does that mean? Well, no more commercials, for one thing, but it also might (and the contingency of this prediction cannot be emphasized enough) mean a slow return to fiscal sanity. Historically, budgets tend to stabilize, and deficits tend to shrink, when government is divided. It has been a long time since we have had divided government characterized by one party with a socialist wing and the other with a trillion-dollar infrastructure plan, but historical trends may yet return to force nevertheless.
For all their talk about keeping budgets in check and maintaining fiscal sanity, both major political parties in the United States tend to rack up massive debts when they control both lawmaking branches of the federal government. It is under divided government, rather — when one party controls one or both chambers of Congress and the other controls the White House — that budgets tend to shrink, and deficits begin to fall.
The correlation is not perfect, of course. Many other factors affect government spending levels. If the economy is in recession spending levels spike regardless of the distribution of political power, and during wartime, spending trends follow mobilization to fight the conflict. What tends to be true, though, is that when the opposition party controls Congress, specifically the power of the purse in the House of Representatives, the rate of change in the federal deficit goes negative.
Take the Republican takeover of Congress during the administration of President Obama as an example. President Obama began his first term with Democrats in control of both the House and the Senate. Under this unified government, spending exploded in the first year in which the Obama administration was completely in control of the budget (FY 2010, see chart below). Although, again, it must be noted that much of this spending was in the form of fiscal stimulus, in an attempt to counteract the deepening Great Recession, and that spending did start to come down after President Obama’s first budget (it is hard not to come down when the deficit was nearly $900 billion larger in FY 2010 than FY 2009).
The Republicans took control of the House of Representatives in a wave election in 2010 and increased their majority in 2012. It was in 2012 that the famous (or, perhaps, infamous) sequester budget deal was worked out between the Republican House, Democrat Senate, and Democrat White House. The sequester was followed by dramatically lower deficits in FYs 2011-2016 (the data are presented below).
Again, these effects do not occur in a vacuum. Deficits would almost certainly have come down in the second half of the Obama administration regardless of who controlled Congress, because they had so dramatically increased in the first two years of the administration. However, holding all else equal, it is hard to say that opposition control of the power of the purse did not have a depressing effect on spending.
Also, in FYs 2007 and 2008, a newly Democrat-controlled Congress worked with the Republican White House of George W. Bush to reign in the excessive spending of the early 2000s — Republicans enjoyed control of the White House and both the House and Senate, until Democrats won majorities in both houses in the 2006 elections (technically the 2006 elections resulted in a 49-49 tie in the Senate, but independents Bernie Sanders and Joe Lieberman caucused with the Democrats).
The correlation is not perfect, and the relationship is significantly affected by factors exogenous to which party controls which branch of government, but the historical relationship between divided government and shrinking deficits is something to keep an eye on. The deficit for FY 2019 is projected to increase to $955 billion. If a divided federal government does manage to shrink that number down to size, both sides can justifiably claim victory. Democrats will tell their base they have reigned in President Trump’s profligate spending practices, and Republicans will shore up their base with evidence of the promised return to fiscal sanity. Whether the requisite spending reduction will actually occur, on the other hand, is far from certain.
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