Explaining Change and Stability in the U.S. Federal Budget: the Effects of Political and Economic Factors on Appropriations

Abstract

This study examines which political and economic factors influence the United States annual budget. As there is a gap in the scholarship surrounding the interaction of environmental variables and their effect on the allocation of funds across programs and agencies, this thesis adds a novel contribution to the literature. First, this paper utilizes a data set on the federal budget for fiscal years 1955 to 2002 and contains financial information on over 1,800 individual government programs. By leveraging this dataset, I produce a distribution of year-to-year changes in the budget during the sample period and determine patterns in the volatility of federal spending patterns over the past half century at different levels of aggregation. Second, by using an OLS model, this paper explores the relationship between the political and economic variables and changes in the budget over time. Particularly, the results support the conclusion that other than the constraining nature of the deficit on congressional spending decisions, changes to the budget have largely been a result of endogenous—rather than exogenous—forces at all levels of aggregation.