Congressional Bargaining and the Distribution of Grants

• In Event: Oversight, Delegation, Bargaining, and Control by the U.S. Congress

Abstract

In the United States, the federal government allocates over $700 billion annually in grants to state and local governments. This type of federal funding, known as grants-in-aid, encompasses programs such as Medicaid, the Title I-A education program, Temporary Assistance for Needy Families (TANF), Section 8 Housing Choice Vouchers, and the Community Development Block Grant (CDBG). Grants-in-aid account for 16.5% of all federal spending and over half of state government funding for health care and public assistance. However, legislators have criticized these programs for allocating money based on political reasons as opposed to need. As a result, some programs do not effectively to target funding to the areas with the greatest need.

How do political factors shape, and at times distort, the distribution of federal assistance? Existing research highlights the role that congressional rules and political considerations play in the distribution of federal funding. But, while grants-in-aid account for the majority of federal assistance, most theories about the allocation of funds focus on earmarks or “pork barrel” spending. Unlike earmarks, which allocate funding to specific places for one-off projects, grants-in-aid are primarily distributed based on statutory formulas that persist for many years. Thus, a theory that incorporates political considerations, congressional rules, and the structure of allocation formulas is needed to understand federal spending, and federal policy more broadly.

In this paper, I formalize a theory of congressional bargaining over allocation formulas for grants-in-aid, and provide empirical evidence consistent with the theory. Unlike existing theory on grants-in-aid, I incorporate the role of congressional committees and the status quo policy in the policymaking process. In doing so, I illustrate how the congressional committee system combined with legislators' self interests can help to improve the targeting of funding to areas with the greatest need when funds are allocated using a formula. However, legislators' abilities to target funding to these areas depend on the status quo policy and can be constrained by majority and super-majority rules.

Author

• Leah Rosenstiel, Vanderbilt University