The power of the purse and the budgetary reversion

The power of the purse and the budgetary reversion

1
Preliminary draft
The power of the purse and the budgetary reversion*
by
Gary W. Cox
Department of Political Science
Stanford University
[email protected]
First version: May 8, 2012
This version: April 5, 2013
Abstract:
In this paper, I document a dramatic increase, from 1875 to 2005, in the number and
proportion of the world’s constitutions that mandate executive-favoring budgetary
reversions. After defining such reversions and showing that they can eviscerate the
legislature’s power of the purse as traditionally defined, I show that they have the sort of
correlates that Montesquieu and other advocates of the power of the purse might have
expected. In particular, governments operating under such reversions are more prone
to violent leadership transitions, even controlling for whether they hold democratic
elections. Finally, I demonstrate that one’s picture of the progress of democracy over
the last century and a half is much different, when one considers not just the executive’s
vertical accountability (to the electorate) but also his/her horizontal accountability (to
the legislature). Huntington’s (1991) well-known waves of electoral democracy have
been countervailed by waves of fiscal autocracy.
* I thank Emily Beaulieu, Lisa Blaydes, Thomas Brambor, John Carey, Jim Fearon, Phil
Keefer, Sebastián Saiegh, Ken Scheve, and Barry Weingast for their comments.
2
The power of the purse and the budgetary reversion
The power of the purse has long been viewed as the main weapon in the arsenal
of legislatures seeking to control the executive branch. English parliamentarians,
pamphleteers and philosophers around the time of the Glorious Revolution first
trumpeted the importance of such power. Their ideas, later amplified by Montesquieu
(1989[1748]), Madison (2009[1788]) and other Enlightenment figures, now form part of
the standard canon of western political thought.
In this paper, I ask the following questions. First, what constitutional provisions
are necessary to establish the legislature’s power over the purse? This question leads to
a theoretical analysis of the budgetary games that modern constitutions set up; and the
relative bargaining leverage they confer on the executive and legislative branches. The
analysis focuses on the budgetary reversion—i.e., the default budget that comes into
force if no budget has been adopted by the beginning of the new fiscal year. I articulate
conditions under which what I call executive-favoring reversions can give executives as
much de jure budgetary control as an absolute monarch or dictator would enjoy.
Second, what is the constitutional history of the power of the purse? Relying on a
new dataset documenting budgetary reversions 1875-2005, I show that EFRs have
increased dramatically in the world’s constitutions, appearing in waves corresponding to
the creation of new states after World War I, World War II, and the Cold War.
Third, what are the political consequences that follow when constitutions fail to
create a legislature with a firm de jure grasp of the purse? According to the
Montesquieuan theory of the separation of powers, undoing the power of the purse
raises an unacceptable risk of tyranny (Montesquieu 1989[1748], p. 164). Yet,
proponents of executive power have argued that this risk can be mitigated by directly
3
electing the executive and is worth running when turbulent assemblies produce political
disorder. Given over a century’s evidence, which view appears to be vindicated?
Consistent with Montesquieu’s warning, I show that executive-favoring
reversions correlate with a higher risk of extra-constitutional political successions. The
effects on leadership turnover are large enough to suggest that the previously unknown
waves of fiscal autocracy documented here have countervailed the well-known waves of
electoral democracy (Huntington 1991; Teorell 2010) with which they largely overlap.
The classical theory of the power of the purse
Early modern accounts of the power of the purse trace back to England’s Glorious
Revolution. In the aftermath, both Whigs and Tories agreed the Crown would seriously
address parliamentary grievances only if constrained by financial necessity to do so. In
order to ensure that such financial necessity would always exist, MPs used the following
tactics. First, the House of Commons put time limits on most of its tax grants (Cox
2012a, pp. 572-6). That is, the Crown’s legal authority to collect taxes expired
occasionally, forcing it to seek parliamentary (re)approval. Second, the House of
Commons secured the right to authorize (or deny) all new sovereign debt (Cox 2012a,
pp. 576-84), giving it another frequently occurring occasion on which to demand redress
of grievances in return for revenue. Third, the Commons demanded and secured annual
state budgets (Dincecco 2011, pp. 24-31). This meant that the Crown’s legal
authorization to expend money lapsed at the end of every financial year, whereupon it
needed to seek parliamentary re-authorization.
These fundamental legislative rights—to extinguish or renew the executive’s
authority to collect taxes, issue debt, and expend state funds—constitute the traditional
4
powers of the purse. Madison (2009[1788], p. 298) asserted their collective importance
as follows: ―This power over the purse may…be regarded as the most complete and
effectual weapon with which any constitution can arm the immediate representatives of
the people, for obtaining a redress of every grievance, and for carrying into effect every
just and salutary measure.‖
Montesquieu (1989[1748], pp. 164) had earlier stressed the complementary point
that disabling the power of the purse risked tyranny: ―If the executive power enacts on
the raising of public funds without the consent of the legislature, there will no longer be
liberty, because the executive power will become the legislator on the most important
point of legislation.‖ In other words, the power of the purse was essential to maintain a
healthy separation of powers in which the legislature could check and balance the
ambitions of the executive.
Getting around the power of the purse
Neither Madison, nor Montesquieu, nor their English predecessors explicitly
analyzed how an executive might undermine the power of the purse.1 Logically,
however, executives have two basic options. One is to control enough of the legislature’s
membership so that it does not pose an independent check on executive authority. For
example, some constitutions have allowed the executive to appoint enough legislators to
ensure their aggregate compliance, while others have allowed the executive to nominate
the only candidate for most or all of the legislative seats.
1
A Przeworski (2011) observes, classical theories often lack clarity as regards how a separation of
powers can be sustained in the face of determined efforts to aggregate powers in a single actor’s hands.
5
The other way to undermine the power of the purse is either to remove the
legislature’s constitutional powers or to disable them.2 My focus here will be on the
latter approach. The rest of the paper describes how budgetary reversions can
eviscerate the power of the purse, documents the kinds of reversion used over the period
1875-2005, and shows that reversions strongly affect important political outcomes.
Defanging the legislature via budgetary reversions
The bulk of contemporary constitutions endow the legislature with the right to
approve or reject taxes, loans and the state budget.3 Yet, these component powers of the
purse do not ensure that even a cohesive legislative majority can control the budget.
The main problem has to do with reversionary spending levels. Many
constitutions stipulate that, if no budget has been adopted by the beginning of the new
fiscal year, then either the executive’s proposed budget is to be automatically enacted; or
expenditures may continue indefinitely at the level of the previous budget. These
executive-favoring reversions (EFRs) stand in contrast to legislature-favoring reversions
(LFRs), in which the government must shut down if no new budget is approved. In this
section, I consider how different budgetary reversions affect the legislature’s ability to
(a) force spending reductions; (b) secure the budget the median legislator prefers; and
(c) limit executive rents.
2
The main ways of removing the legislature’s powers are suspending the constitution, suspending the
legislature, or writing constitutions that do not confer the traditional powers of the purse in the first place.
Another way to remove or disable legislative powers is to declare a state of siege, emergency, or
exception and rule indefinitely by decree. For a general review of emergency powers, see Ferejohn and
Pasquino (2004). On the abuse of emergency powers in Latin America, see Loveman (1993).
3
According to the Institutions and Elections Project dataset (http://www2.binghamton.edu/politicalscience/institutions-and-elections-project.html), legislative approval of the budget (resp., taxes) was
required in 93% (resp., 95%) of the country-years covered (167 countries, 1972-2005). A survey by the
International Parliamentary Union and the World Bank Institute found that the legislature approved the
state budget in 92% of the 52 countries responding (Pelizzo and Stapenhurst 2004, p. 7).
6
I shall consider a general budgetary process that entails the following steps
(illustrated in Table 1). First, the executive has the right to make the first budget
proposal—which I shall denote by xE  n.
Second, the legislature either (a) accepts xE, (b) amends xE to xL, (c) rejects xE in
toto, or (d) does nothing before the onset of the new fiscal year. If the legislature
accepts, then xE becomes the budget and the game ends. If the legislature rejects the
executive’s proposal or does nothing, then an exogenous budgetary reversion, xR, comes
into force.
Third, if the legislature amends xE to xL, then the executive decides whether to
accept the amended budget, in which case xL comes into force and the game ends; or to
veto it.4 If the executive vetoes the amended budget, then either the legislature
overrides that veto, leading to the adoption of xL; or it does not, leading to the adoption
of the budgetary reversion, xR.5
Table 1 about here.
The budgetary process just described takes place in an institutional context that
may vary from country to country. I focus on contexts in which the following
―background‖ features—all favorable to the legislature—are held constant: there are no
restrictions on the amendments the legislature can make; the executive has no
impoundment or virement powers; and there exists a cohesive legislative majority,
denoted M, which is independent of the executive and capable of acting as a unitary
4
I consider only package vetoes here. Line-item vetoes further increase executive influence in the
context of budgeting (although not necessarily in the context of non-budgetary legislation, as shown by
Alemán and Schwartz 2006).
5
Some constitutions stipulate different reversions, depending on whether the legislature (i) does nothing
or (ii) rejects the executive’s proposal or fails to override an executive veto. I focus on the simpler case
here, in which the same reversion is used at both nodes.
7
actor. Can EFRs defang the power of the purse, even when that power is wielded by a
united legislative majority possessing full amendment rights?
The answer depends on three other ―foreground‖ features of the institutional
context that I allow to vary. First, let qremove denote the smallest fraction of the lower
chambers’ membership sufficient to remove the executive from office. Intuitively, if M
can remove the executive from office at any time, then it should be able to prevent abuse
of any EFR. In practice, most polities have values of qremove that lie between ½—when
an effective vote of no confidence exists—and 2/3—a typical level needed for
impeachment. Some constitutions, however, envision no procedure whereby the ruler
can be constitutionally removed and would be coded as qremove = 1.6
Second, let qbudget denote the smallest fraction of the lower chambers’
membership sufficient to pass the budget against the executive’s objections. Intuitively,
if M can pass the budget on its own, then the reversion should not matter. In practice,
in order to pass the budget without the executive’s assent, M must have enough votes to
surpass: (1) the threshold, qfilibuster, required to end any filibuster of the budget mounted
by the executive’s allies; (2) the threshold, qsenate, needed to override any objections by
an executive-controlled senate; and (3) the threshold, qoverride, needed to override any
executive veto.7
Finally, let s be a dummy variable indicating whether the EFR is subject to strict
scope or duration limits (s = 1) or not (s = 0). Germany’s 1949 Constitution, for
example, allows expenditures to continue at the previous year’s level only in three
6
Technically, the case in which the legislature simply cannot remove the executive would correspond to
qremove > 1. For convenience, I will use qremove = 1 to denote both cases in which only a unanimous vote
suffices to remove the executive and cases in which the legislature cannot remove the executive at all.
7
All told, then, qbudget = max{qfilibuster, qsenate, qoverride}  [1/2,1]. If no filibuster of the budget is possible,
then qfilibuster = ½. If no senate exists or it cannot veto the budget, then qsenate = ½. If the executive cannot
veto the budget or a simple majority suffices to override, then qoverride = ½.
8
enumerated areas. As such scope limits become more restrictive, the reversion more
closely approximates a government shutdown. Other constitutions allow the reversion
to stay in force only for a limited period, after which the government must shut down.
As the allowable duration shrinks, such reversions too more closely approximate a
government shutdown.
The question I shall ask in the rest of this section is: Given a fixed institutional
context, denoted (background; qremove,qbudget,s), how does changing the budgetary
reversion (xR) affect budgetary outcomes? The punchline of the analysis is that there
exist both ―safe‖ institutional contexts, in which EFRs may contribute to budgetary
efficiency without imperiling liberty; and ―dangerous‖ institutional contexts, in which
EFRs gravely lessen M’s bargaining leverage vis-à-vis the executive, E. The dangerous
contexts are those in which M can neither remove E (qremove > |M|) nor adopt the budget
alone (qbudget > |M|) and there are no scope or duration limits on the EFR (s = 0). In
such contexts, EFRs give the lion’s share of budgetary influence to the executive, who
can ―cash in‖ that influence in various ways, among which I focus on fending off
demands for spending retrenchment, determining the broad ideological principles of the
budget, and expanding executive rents.
Can the legislative majority force spending reductions?
Many modern analyses highlight the fiscal common pool problem that besets the
legislature as a major challenge to fiscal discipline in democracies (cf. Hallerberg,
Strauch and von Hagen 2009). From such a perspective, one might view EFRs as
devices to help the executive (who fully internalizes tax costs) restrain the legislators
(who don’t fully internalize tax costs) from spending too much (cf. Alesina et al. 1999;
Lienert 2010).
9
The Enlightenment theorists took a different view, in which the main challenge in
budgeting was mitigating the moral hazard problem besetting the executive (cf. North
and Weingast 1989; Cox 2012a). The big spenders in early modern Europe were the
monarchs who lavished money on wars and palaces (Hoffman 2009); and the big
question was how much the legislature could threaten to retrench spending, while it
bargained for redress of grievances.
Adopting the Enlightenment perspective to begin with, I ask how much M can
force E to stop spending, when the institutional context is dangerous. The answer
depends heavily on the budgetary reversion.
When the reversion is the executive’s proposal, E can ensure the adoption of his
proposed budget, by some combination of filibustering, senatorial delay and executive
veto. Since M is ex hypothesi too small to overcome at least one of these tactics, M
cannot force the executive to reduce spending at all.
M’s position is somewhat better when the reversion is the previous year’s budget.
M can, by refusing assent, impose last year’s budget. Given an inflation rate of I, this is
equivalent to imposing a cut in real expenditure of I/(1+I).
Finally, when the reversion is a government shutdown, M can force E to stop
spending, simply by withholding assent. This is the reversion that the architects of
England’s post-Revolution order constructed; and that Montesquieu, Madison and
others implicitly envisioned in their paeans to the power of the purse.
Can the legislative majority determine the budget’s ideological cast?
Rather than focus on how much legislative majorities can force the executive to
reduce spending, one might instead ask where the final budget lies, as between the
median legislator’s ideal point, z1/2, and the executive’s ideal point, zE. As an example,
10
consider a regime with the following characteristics. First, budgetary politics is an
unidimensional fight over the ratio of military to social spending, with those on the
―left‖ preferring a smaller ratio and those on the ―right‖ preferring a larger ratio.8
Second, the executive’s ideal ratio is to the right of the ideal ratio of at least q = qbudget ≤
qremove of the legislators: zE ≥ zq.9 Third, the institutional context is dangerous.
Given the scenario just described, the consequences of different budgetary
reversions can be analyzed by applying Krehbiel’s (1998) model of pivotal politics. I will
simply summarize the results of such an application briefly here (relegating a fuller
discussion to the web appendix).
If the reversion is the executive’s proposal, then the final budget need only please
enough legislators to sustain either a senate veto, or an executive veto, or a filibuster,
which means it will lie at the pivotal legislator’s ideal point, zq. If E controls over 1-q of
the legislators, then zq = zE and the executive can secure his ideal budget.
If the reversion is last year’s budget, then the final budget will lie in the interval
between z1/2 and zq. For example, if last year’s budget lies halfway between the median
legislator and the veto pivot, then the executive will veto any leftward moves (and the
veto pivot will sustain that veto); while the median legislator will veto any rightward
moves.
Finally, if the reversion is a government shutdown, the final budget always lies at
z1/2. This is the only reversion that ensures the median legislator can determine the
budget in each year.
8
Obviously, other kinds of unidimensional conflict over the budget are possible, such as disputes over the
total size of government. I focus on the military/social ratio here for illustrative purposes. In terms of the
formal notation introduced at the beginning of the section, unidimensionality means n = 1.
9
The case in which the executive’s ideal ratio is less than the ideal ratio of at least q of the legislators (zE
< z1-q) is similar.
11
Can the legislature limit the executive’s rents?
The spatial model of budgetary reversions just presented, and the two-
dimensional models considered by Wehner (2010, ch. 2), seem appropriate for
consolidated democracies. But these models implicitly assume that the executive cannot
extract rents from the state budget—a problematic assumption in virtually all
autocracies and many democracies. Thus, in this section I consider a third perspective
on the budgetary process, based on McGuire and Olson’s (1996) model of autocracy.
In their model, a dictator unilaterally decides taxes and expenditures on public
goods. After paying for the public goods promised in the budget,10 the dictator takes any
remaining tax revenue as a rent. While one might interpret this as an illegal conversion
of public funds into private income, one can also interpret it as representing more subtle
(and legal) forms of rent extraction.
McGuire and Olson argued that even a dictator who cared only about maximizing
his/her own rents had incentives to restrain taxes and provide public goods. More
important for present purposes, the dictator’s optimal tax rate, t E* , and public goods
expenditure, GE* , maximize his/her rents.
In the rest of this section, I consider how a ruler’s rents change, when the
legislature must approve the executive’s budget proposal (G,R)—which stipulates the
division of total tax revenues T(t,G) between public goods G and rents R, subject to the
constraint that G + R = T(t,G). I shall focus on a case that is minimally different from
pure dictatorship, in the following sense: the tax rate has been previously set to the level
10
McGuire and Olson assumed that the dictator could commit to providing public goods at the levels
announced in the budget.
12
a dictator would prefer (t = t E* ); and the institutional context is dangerous. What are the
ruler’s rents, under each of the possible budgetary reversions?
If the reversion is the executive’s proposal, then the executive can propose the
same budget, with the same level of rents, that a dictator would—(G,R) = ( GE* , RE* ). If
the legislature amends this proposal, the executive can block the amended budget,
thereby triggering the reversion.
If the reversion is last year’s budget, then the executive can prevent the legislative
majority from lowering rents but M can reject any increases. Thus, E’s rents will be the
same as last year’s.
If the reversion is a government shutdown, then—regardless of what the
executive proposes—the legislative majority can pass a budget that gives the executive
negligible rents. The executive will not block such an amended budget, as he gets zero
rents in the reversion.11 This is the only reversion that ensures the executive’s rents will
be negligible.
Summary
Even when the legislature has unrestricted rights to amend the budget and is
controlled by a cohesive majority, executive-favoring budgetary reversions can
seriously erode the legislature’s power over the purse. Institutional contexts that
ensure such an erosion, which I have dubbed dangerous, are those in which the
reversion is not limited (in scope or duration) and the legislative majority can neither
remove the executive nor pass the budget against the executive’s opposition.
11
If the executive vetoes the budget and is not overridden, then the reversion comes into force; there is
no veto bargaining a la Cameron (2001). Rents are nil in the case of a government shutdown because, in
the McGuire-Olson model, national income—and hence tax revenue—is nil when no public goods are
*
provided. That is, T( t E ,0) = 0. Of course, this assumption is not needed. As long as government
shutdowns reduce tax revenue sufficiently, the executive will not veto the assembly’s amended budget.
13
What if the legislature-favoring ―background‖ conditions assumed at the
beginning of this section do not hold? In this (common) case, the executive’s position
will be further enhanced. Restricting how the legislature can amend the executive’s
budget proposal can only help the executive (cf. Wehner 2010, chapter 2) and, in the
extreme, will allow the executive to make a take-it-or-leave-it offer (cf. Cheibub 2007, p.
103). Expanding the executive’s impoundment and virement powers can only enhance
the value of the reversion for the executive, lower it for the legislature, and thus push the
budgetary bargain in the executive’s direction. This point is particularly important to
remember when considering how much a reversion to last year’s budget favors the
executive, since so many such reversions are accompanied by amendment restrictions
and implicitly convey at least impoundment and often virement powers.
Trends in budgetary reversions, 1875-2005
I’ve stated some general conditions under which EFRs can seriously erode the
legislature’s power of the purse. In this section, I ask how common EFRs are and how
often they arise in dangerous institutional contexts. To answer these questions, I have
compiled a dataset that codes the constitutionally stipulated budgetary reversions in 166
countries over the period 1875-2005. Countries often have statutes that further
elaborate their budgetary reversion (e.g., the U.S.’s Anti-Deficiency Act) but here I focus
on constitutionally mandated reversions.
The sample covers every country in the world from the first year in which it
operated as an independent entity under a written constitution until 2005, excluding (a)
countries that did not have a population exceeding 1,000,000 by 1990; and (b) years
14
before 1875.12 In practice, the current version of the dataset covers 98% of the possible
country-years between 1875 and 2005.
The budgetary reversion is classified as a government shutdown; last year’s
budget; or the executive’s proposal. If a legislature does not exist or lacks the traditional
powers of the purse in a particular country-year, then the reversion is coded as the
executive’s proposal.
Figure 1 displays the number and percentage of constitutions containing EFRs in
each year from 1875 to 2005. Where only 12 constitutions stipulated an EFR in 1875,
the number grows almost monotonically and reaches 105 in 2005. The percentage also
grows, with a few minor reversals, from 33% in 1875 to 68% in 2005. Thus, there has
been a striking growth in EFRs.
Figure 1 about here.
Figure 2 divides the full sample of 166 countries into five cohorts, those entering
the dataset in 1875-1899, 1900-1924, 1925-49, 1950-74, and 1975-2005. While the first
two cohorts exhibit some growth in EFRs over time, most of the overall growth is
explained by differences between the cohorts.13 The predilection for EFRs is particularly
striking in the last three cohorts, composed largely of countries emerging on the scene
after World War I (the 1925-49 cohort), World War II (the 1950-74 cohort), and the
Cold War (the 1975-2005 cohort). In other words, the upward trend in EFRs is driven
primarily by new countries whose founding constitutions mandated such reversions,
and secondarily by old countries revising their initial constitutions.
Figure 2 about here.
12
I include the UK in my sample (as possessing a written but unconsolidated constitution), as well as
several cases in which Basic Laws are taken to be the constitution.
13
The figure starts plotting each cohort in the year following the period defining it. Thus, the 1875-99
cohort begins plotting in 1900, and so on. The exception is the last cohort, which begins plotting in 1990.
15
The extent to which new countries drive the growth in EFRs can also be seen by
considering the 148 new EFRs documented in the dataset. Of these, 99 (67%) arise
because a newly independent country enters the dataset with an EFR already in place,
while another 49 (33%) correspond to conversions from LFRs to EFRs.
In addition to documenting their numbers, it is important to note that the vast
majority of EFRs occur in dangerous institutional contexts. The empirically most
common ways to render EFRs less damaging—a clear14 legislative right to dismiss the
executive; and strict limits on scope or duration—are deployed in 11% of the countryyears with EFRs over the period 1875-2005.15
A caveat in interpreting the results presented thus far is that some constitutions
do not contain explicit provisions regarding what happens, should no budget be
approved by the beginning of the new fiscal year. These cases were coded according to
their implicit provisions.16 Whatever errors exist in these codings, they do not affect the
conclusions suggested by Figures 1 and 2. Constitutions have been increasingly clear
about the budgetary reversion: the percent with explicit clauses increases almost
14
If a legislative vote of no confidence need not lead to the government’s resignation, I do not count the
legislature as having a clear right to dismiss the executive. Quite a few regimes fail this test, because the
Head of State can respond to votes of no confidence by dissolving the assembly. Such an option impairs
the legislature’s ability to curb the executive’s exploitation of EFRs via threats to vote no confidence,
especially if the ensuing elections will be non-democratic.
15
Another way to render EFRs less dangerous is to prohibit executive vetoes of the budget, as in Costa
Rica. I do not yet have a systematic coding of this tactic but it appears to be rarer than the other tactics.
16
The coding rules were as follows. If the constitution does not confer the three traditional powers on the
legislature, then the reversion is classified as the executive’s proposal. If the constitution confers the right
to approve the budget (and possibly also taxes and loans) but opens loopholes that allow the executive to
spend money without explicit legislative approval, then the reversion is classified as favoring the
executive. Otherwise—powers conferred, no loopholes—the reversion is classified as favoring the
legislature. Loopholes are deemed to exist when the executive has decree power that implicitly entails
expenditure authority. For example, if the executive can unilaterally declare an emergency and take “all
measures necessary” to quell internal disturbances, then he is empowered to undertake actions that
entail state expenditures.
16
linearly from 22% in 1875 to 70% in 2005. Looking only at constitutions with explicit
clauses, the upward trends in Figures 1 and 2 are, if anything, steeper.
I can also report that the increase in EFRs is not driven by suspended
constitutions or one-partyism. If one focuses only on country-years with constitutions
in force and multi-party legislatures in session, the basic trends are just as sharp.
The origins of EFRs
What drove the trends shown in Figures 1 and 2? What caused certain countries
to mandate EFRs in their constitutions?
In many newly independent countries, budgetary reversions appear to be largely
exogenous colonial inheritances, rather than endogenous responses to political
circumstances. These cases are valuable because they allow us to study the effects of
EFRs with less concern about selection bias (on which more below).
In countries that began with an LFR and then switched to an EFR, however,
EFRs were clearly endogenous. They were implemented because someone, for some
reason, wished to strengthen the executive vis-à-vis the legislature. In the rest of this
section, I consider several examples of endogenous EFRs, putting off discussion of
exogenous EFRs until later.
EFRs as strong medicine: Chile
Nineteenth-century Chilean legislators clearly viewed EFRs as important threats
to their authority: ―[T]he Revolution of 1891 originated in a deadlock over the budget.
In January 1891, as the Chilean parliament refused to approve the budget…, President
José Manuel Balmaceda decreed that the previous year’s budget would remain in effect,
17
thus openly violating constitutional provisions. Parliament proceeded to impeach him
and the revolution broke out‖ (Santiso 2004, p. 14).
The congressional forces triumphed in 1891 and continued to wield the power of
the purse thereafter. Congressional majorities would often delay passage of the budget
as a bargaining tool, in order to force the resignation of unpopular ministers and
governments (Guerra 1929, p. 237). In the view of contemporaries favoring a stronger
executive, the results were disastrous: budgetary interruptions, shifting legislative
majorities, and unstable governments (Guerra 1929, p. 22). The solution, implemented
in the new Constitution of 1925, was to break Congress’s power of the purse by
establishing the executive’s proposal as the budgetary reversion (Guerra 1929, p. 268).
Henceforth, proponents said, Congress would be able to approve the annual state
budget, but could neither delay nor reject it.
While vastly increasing executive power, the Chilean constitution also established
an electoral process for the presidency which, through its runoff provisions, encouraged
coalition-building. One might argue that the necessity of building a broad coalition to
win the presidency constrained how presidents used their power.17
EFRs as strong medicine: France V
In parliamentary and semi-presidential systems, too, inefficient bargaining
between the executive and legislature generated demands for EFRs. To illustrate,
consider France V.
The Fifth Republic’s Constitution was shepherded mainly by Michel Debré, who
had written several books decrying the legislative dysfunctions of the Fourth Republic
17
See Siavelis (2002, pp. 96-100) for a discussion of why post-authoritarian Chilean presidents have not
overtly exploited the EFR re-established in 1980; and Baldez and Carey (1999) for an analysis that
emphasizes how well the president does under Chile’s post-authoritarian rules.
18
and advocating a presidential system as remedy. While Debré did not get
presidentialism, he did get a strengthened presidency, a strengthened government, and
a weakened Parliament (Friedrich 1959; Huber 1996). Of particular concern for present
purposes, the government’s budgetary proposal was to be the reversion; and the
government could use either the package vote (Article 44) or the confidence procedure
(Article 49.3) to force an up-or-down vote. As Friedrich (1959, p. 825) noted, ―only a
rather limited power over the purse is conferred upon Parliament.‖
Still, the French constitution established a clear vote of censure that required
only an absolute majority to pass and sufficed to evict the government from office.
Moreover, French elections—both legislative and presidential—were free, fair and
regular. Thus, the government could be held accountable—both by parliament and by
the electorate—for its use of the power that the EFR (and other executive-strengthening
features) conferred.18
The same cannot be said for most of Francophone Africa. At independence, 21 of
France’s 24 former sub-Saharan colonies in my dataset adopted versions of the Fifth
Republic’s budgetary reversion. Yet, of these 21, 18 provided no means by which a
simple (or absolute) assembly majority could remove ministers from office. Thus, as in
Chile, the only thing restraining a president from exploiting the EFR in these countries
was the necessity of (re)election. As we know, however, African incumbents moved
quickly to loosen their electoral constraints—via one-partyism, presidencies for life, and
other means. They were thus left free to exploit their EFRs.19
18
See Huber 1996, ch. 6 for a detailed case study of the electoral constraints French governments faced
in budgetary politics.
19
It should also be noted that the French constitution allowed a simple majority to override a presidential
veto, whereas override requirements in Francophone Africa are typically 2/3. Thus, African executives
are better able to trigger the reversion, or threaten to do so, should they wish.
19
EFRs as insurance against redistribution
A series of influential studies (Boix 2003; Acemoglu and Robinson 2005;
Przeworski 2009) argue that domestic elites around the globe feared manhood suffrage
would enable the poor majority to redistribute income from the rich minority. The
literature has used elite fear of redistribution primarily to explain how income
inequality should relate to democratization (Boix 2003; Acemoglu and Robinson
2005).20 Yet, elites need not have accepted the domination of the new median voter.
They could seek to control the legislature’s membership, via executive appointment,
one-partyism, or election rigging. Or they could reduce the budgetary power of the
directly elected lower chamber vis-à-vis the executive (via wholesale removal of its
powers or EFRs) and then insulate the latter from direct electoral pressure (via
hereditary succession or elite-dominated electoral colleges). Under either strategy—
reducing the legislature’s independence or reducing its power—the median voter’s
preferences for redistribution would not translate smoothly into budgetary outcomes.
Christian Dippel’s (2012) analysis of how plantation elites in the Caribbean
responded to the impending voting strength of freed slaves exemplifies the logic just
sketched. In 1838, slavery was abolished throughout the British Empire. At that point,
fourteen Caribbean colonies all had legislatures comparable to those in the Canadian
and Australian colonies, and had operated them since their respective inceptions in the
1600s and 1700s. ―However, between 1854 and 1877, local parliaments in 11 of the 14
[colonies] voted to either abolish themselves completely or significantly curtail their
own powers by allowing a majority of legislators to be appointed by the colonial
administration‖ (Dippel 2012, p. 1). The plantation elites recognized that ensuring their
20
For contrary views, see Houle (2009); Ansell and Samuels (2010).
20
control of a legislative majority would be increasingly difficult, were the legislature
elected in free and fair contests in which substantial numbers of freed slaves had the
vote. Yet, despite their best preventive efforts, after 1838 the number of freed slaves
able to purchase small holdings, and thus qualify for the franchise, grew dramatically.
While they still had the chance, the plantation elites chose either to abolish their
legislatures entirely (by becoming a Crown Colony) or to ensure that an appointed
executive controlled the legislature’s members (via appointment).
Italy after World War I provides another example of legislative demotion—one
that involves, not abolishing the legislature (as in the Caribbean) but rather lessening its
power (via an EFR). Italy had adopted universal manhood suffrage in 1913 and, for the
brief spell between 1919 and 1921, was an electoral democracy with the Socialists
holding the single largest voting bloc in parliament. Democracy ended when the King
(a) refused to sign Prime Minister Facta’s decree declaring martial law, thereby allowing
Mussolini’s ―March on Rome‖ to continue; and (b) dismissed Facta, appointing
Mussolini in his place. Presumably, the King and his traditional supporters appreciated
Mussolini’s opposition to ―class warfare‖ and socialism. In any event, after the 1923
Acerbo Law’s egregious electoral manipulations helped manufacture a fascist majority
in the 1924 elections, Il Duce amended the Statuto Albertino, which had conferred an
implicit LFR, in order to introduce an implicit EFR. The threat that the popularly
elected parliament would vote for redistributive policies was thus removed, both by
rigging its elections and by limiting its de jure influence over the budget. Mussolini
never made the EFR explicit, perhaps because the introduction of a one-party regime in
1928 obviated the necessity.
21
As a final example of preemptive EFRs, consider Latin America. Income
inequality throughout the region was very high at independence. Thus, local elites had
much redistribution to fear, were the masses enfranchised (cf. Przeworski 2009).
Consistent with this point, in 1900 the percentage of the population eligible to vote in
Western Europe was 4.5 times higher on average than in Latin America.
When a wave of suffrage expansions swept Western Europe during and after
World War I, Latin American elites might have calculated that continuing to limit
suffrage rights in their own countries would be increasingly difficult going forward; and
sought ways to prevent the median voter’s preferences on taxes from translating into
actual tax policies. In any event, Latin American suffrage rights steadily closed the gap
with Europe over the rest of the century; and the share of Latin American countries with
EFRs surged from 45% in 1917 to 80% in 1946.21
Summary
The survey just completed shows that endogenously chosen EFRs were widely
viewed as potent sources of executive influence. In several cases, proponents of EFRs
touted them as strong medicine to combat legislative dysfunctions borne of members’
parochialism and venality. From this perspective, EFRs might be part of a broader
pattern of strengthening the executive in countries with fragmented and unruly
legislatures—see Shugart (1998) on the Latin American cases of hyper-presidentialism;
and Lauvaux (1988) on the European cases of parliamentarisme rationalisé.
However, EFRs can even defang a legislature controlled by a cohesive majority
party dedicated to fiscal discipline and seeking only ―just and salutary‖ measures. Thus,
21
Of the seven countries switching to EFRs between 1917 and 1946, four did so relatively soon after
suffrage expansions: Bolivia (seven years), Brazil (two years), Cuba (five years), Guatemala
(simultaneously). The other three did so in close proximity to suffrage expansions among their neighbors.
22
from a Montesquieuan perspective, EFRs entail the risk of creating an over-powerful
executive. In the next few sections, I consider some of the consequences EFRs might
entail, focusing on the risk of tyranny.
Consequences of EFRs
In my theoretical analysis, I considered how budgetary reversions affect the
legislature’s ability to force the executive to stop spending, determine the ideological
cast of the budget, and limit executive rents. In this section, I briefly consider relevant
evidence under each heading, before elaborating on the last.
If EFRs mean the legislature cannot stop the executive from spending, one might
conclude they should produce larger governments (as measured by expenditures).
However, as North and Weingast (1989) explained in the context of England’s Glorious
Revolution, such a conclusion would be unwarranted. If taxpayers know their
representatives in the legislature cannot control the executive, they will be more
reluctant to pay taxes or offer loans. Thus, to the extent that EFRs concentrate
budgetary power in the executive, they should produce long-run credibility problems for
the state that reduce revenues and expenditures. While I think there is considerable
historical evidence in favor of this line of argument (see Levi 1988; North and Weingast
1989; Dincecco 2011; Cox 2012a; Saiegh 2012), I do not have space to review it here.
A more straightforward expectation is that the final budget should be closer to
the executive’s ideal point, when the reversion favors the executive rather than the
legislature. Unfortunately, the data needed to explore this hypothesis are available for
only a handful of the country-years in my sample, so I ignore it here.
23
This leaves the last issue—how the budgetary reversion affects the legislature’s
ability to limit executive rents. In the next two sections, I connect executive rents to the
nature of leadership successions, first theoretically and then empirically.
EFRs and leadership successions: Theory
Consider a polity in which the incumbent ruler, A, enjoys some level of rents but
may offer a share of those rents to a key actor, B, in order to deter the latter from
mounting a challenge to his rule. If B accepts A’s offer, then A stays in office and the
game ends. If B rejects A’s offer, then B mounts either a constitutional or a military
challenge to A’s continuation in office. I shall focus on pF, the probability that B ousts A
by force, conditional on ousting him at all; and analyze how pF depends on the
budgetary reversion.
When a LFR is in place, the ruler’s rents are not worth fighting over, so pF = 0.22
When an EFR is in place, in contrast, the ruler’s rents are worth fighting over. Two
conditions then suffice to ensure pF > 0: (1) B prefers to launch a military rather than a
constitutional challenge, conditional on rejecting A’s offer; and (2) B has a positive
probability of rejecting A’s offer. EFRs help ensure that each of these conditions is met.
First, the rents that EFRs confer motivate and enable incumbents to rig any
constitutional procedures by which they might be removed from office. But such rigging
necessarily expands the range of challengers who will prefer military to constitutional
challenges, when they reject the rent shares the incumbent offers them.
22
Strictly speaking, in this model one can conclude only that the probability of a military ouster motivated
by the challenger’s desire for a greater share of rents is nil. One thus needs to assume that the
probability of a military ouster motivated by other considerations—ideology, religion, and so forth—is
unaffected by the budgetary reversion.
24
Second, EFRs create a commitment problem that can cause bargaining failure.
To illustrate, suppose that a ruler wishes to offer the military in his country a flow of
future rents; and that, were the ruler able to commit to such a flow, the military would
accept. Unfortunately, EFRs destroy the ability of a ruler to use the de jure budgetary
process to make such commitments credible. For, in any future budgetary cycle, the
ruler can renege on the deal and unilaterally reallocate rents, if his support in the
legislature can sustain a veto. The ruler’s unilateral budgetary power means that he
must either devise non-budgetary mechanisms of commitment, or pay a much larger
share of rent upfront to keep the military’s support, or endure a higher risk of military
intervention in politics.
The case of Salvador Allende provides an example. Allende came to power with
the support of the Christian Democrats, who required him to endorse a series of
constitutional reforms as the price of their support. Among other things, Allende
promised to respect the traditional structure and autonomy of the armed forces; and to
refrain from creating additional forces.23 Allende’s first budget (for 1972) was passed in
1971 with the Christian Democrats’ support. Allende’s next budget (for 1973) was
prepared during the summer of 1972, while he was still struggling to keep the Christian
Democrats’ support. He failed in that endeavor and the Christian Democrats joined a
center-right electoral alliance whose explicit aim was to win a 2/3 majority in the March
1973 congressional elections. While the opposition won a solid majority, its failure to
attain 2/3 raised the possibility that Allende might seek to dictate the 1974 budget, free
of any concerns about pleasing the Christian Democrats. In the event, however, the
23
Cf. http://www.salvador-allende.cl/Unidad_Popular/Estatuto%20de%20garantias%20democraticas.pdf.
25
armed forces proved unwilling to accept this outcome and Allende was ousted in a coup
before his first ―unconstrained‖ budget could be adopted.
Among the armed forces, rumors that the Left planned to set up a parallel
military force were rife (Valenzuela 1978, p. 100). Allende’s proven track record of
implementing policies by unilateral action (cf. Saiegh 2011, pp. 167-69), along with the
vast powers conferred by the EFR, meant that he could not credibly commit to refrain
from using his 1974 (or 1975) budget to help the most radical elements on the Left
implement their plans. From this perspective, the coup against Allende was a preemptive strike generated by commitment problems inherent in the budgetary
institutions of the Constitution of 1925.
EFRs and leadership successions: Evidence
The theory presented in the previous section entails three main empirical
implications. First, EFRs should enhance executive rents. Second, EFRs should lead to
executive entrenchment. Third, entrenchment and EFRs should each increase the
conditional risk of extra-constitutional succession.
Rents
Unfortunately, executive rents are not easily observed. I can, however, note two
suggestive cross-sectional correlations. First, EFRs correlate with perceived corruption,
as measured by Transparency International (even controlling for electoral democracy
and GDP per capita). Second, EFRs correlate with the presence of kleptocrats, as
identified by the World Bank and the journal Canadian Business. Indeed, if one is
willing to assume that the probability these sources would identify a leader as a
kleptocrat was, conditional on that leader’s true type, uncorrelated with the budgetary
26
reversion, then Bayes’ Theorem implies that a country’s probability of suffering under a
kleptocrat is over 13 times higher when an EFR is in place.
Entrenchment, EFRs and succession
One approach to analyzing EFRs’ effects on succession is path-analytic. One
equation would predict how entrenched each ruler was, as a function of the budgetary
reversion in force. A second equation would then examine how the probability of extraconstitutional successions was affected by both the degree of entrenchment and the
reversion in force.
Given space constraints, I shall not present estimates of the first equation, simply
noting that there is a strong bivariate correlation between EFRs and electoral
entrenchment. I measure the latter by sorting all country-years into three categories,
depending on whether the regime holds: no multi-party elections (high entrenchment);
non-democratic multi-party elections (intermediate entrenchment); or democratic
multi-party elections (low entrenchment). Only 21% of regimes with an EFR were
electoral democracies, with 47% falling into the electoral authoritarian category, and the
remaining 32% holding no multi-party legislative elections at all. In contrast, in regimes
with LFRs the corresponding figures were 71%, 19% and 9%.
In the remainder of this section, I shall focus on the second equation, concerning
how EFRs and entrenchment affect the conditional risk of extra-constitutional
succession. I employ a widely-used dataset that codes all entries into power by national
leaders over the period 1875-2004 as either constitutional or extra-constitutional.24 For
convenience, I shall henceforth use the term ―LFR‖ to mean ―either an LFR or an EFR in
24
The Archigos dataset can be found at http://www.rochester.edu/college/faculty/hgoemans/data.htm.
Cf. Goemans, Gleditsch and Chiozza (2009).
27
a safe institutional context‖ and the term ―EFR‖ to mean ―an EFR in a dangerous
institutional context.‖
Before getting to the full equation, consider some descriptive statistics. Table 2
shows how frequently leaders have entered power by constitutionally irregular means,
as a function of the budgetary reversion and the presence or absence of electoral
democracy (both lagged). The first column shows that 40.0% of new leaders reached
power by irregular means when the budgetary reversion at t-1 was the executive’s
proposal, versus 26.3% when the reversion was last year’s budget, and 9.7% when the
reversion was a government shutdown. As the executive’s grip on the budget
strengthens at t-1, the probability that he is ousted by irregular means at t (conditional
on leadership turnover) increases.
Table 2 about here.
The next column focuses on electoral autocracies, showing that the analogous
figures are 48.6%, 29.6% and 21.7%. The last column focuses on electoral democracies,
for which the analogous figures are 18.8%, 13.2%, and 4.1%. Thus, electoral
democracies were much less likely to experience violent leadership successions than
electoral autocracies but, in both kinds of regime, the budgetary reversion at t-1
correlated strongly with extra-constitutional seizures of power at t.
Since violent entries into power by definition terminate electoral democracy, the
last column of Table 2 suggests that coups toppling electoral democracies were
particularly likely to occur in democracies employing EFRs. A broader point is also true:
democratic breakdowns—whether produced by coups or auto-golpes—are more likely in
democracies with EFRs. In my dataset, there were 38 democratic breakdowns (by the
criteria of Boix, Miller and Rosato) in 802 country-years of electoral democracy with
28
lagged EFRs—a hazard rate of 4.7%; but only 35 breakdowns in 2,902 country-years of
electoral democracy with lagged LFRs—a hazard rate of 1.2%.
The same pattern—a higher risk of democratic breakdown under EFRs than
LFRs—holds both for parliamentary and presidential democracies. Indeed, the
combination of parliamentarism and LFRs is a potent stabilizer of democracy. Over the
period 1875-2005, no parliamentary democracy whose legislature enjoyed an LFR for
at least a generation ever relapsed into autocracy.
Table 3 implements a version of the ―second equation‖ mentioned above by
running a logit regression of extra-constitutional succession on an indicator for the
reversion in force at the beginning of the year, along with a battery of controls. The
controls include two indicators of the electoral nature of the regime at t-1: whether no
or only one-party legislative elections were held; and whether democratic legislative
elections were held. The excluded category consists of regimes holding non-democratic
multi-party elections to fill the legislature’s seats. The economic controls are the growth
rate and lagged GDP per capita. Finally, the analysis also controls for the number of
previous breakdowns in democracy in the country’s history, the percent of the world’s
polities experiencing extra-constitutional successions in the previous year, and regional
fixed effects. Every country-year in which at least one leadership transition occurred is
included in the analysis; and the dependent variable is coded 1 if there was at least one
extra-constitutional succession, 0 otherwise. The standard errors are clustered by
country.
Table 3 about here.
Model 1 shows that, when the reversion favors the executive rather than the
legislature, the probability that a new leader will use irregular means to attain power is
29
significantly higher. One way to gauge the substantive size of this effect is to say that it
is comparable to that of transitioning from an electoral democracy to an electoral
authoritarian regime (as can be seen by comparing the coefficient on the reversion to the
coefficient on electoral democracy). Alternatively, consider a country with an LFR and a
probability of extra-constitutional succession equal to the relative frequency given in
Table 2 for such countries: .097. In an otherwise comparable country with an EFR, the
probability of a constitutionally irregular succession (given that some succession occurs)
increases to .167.
Because the analysis controls for the degree of electoral entrenchment, the
estimated coefficient represents only the direct effect of EFRs. Their indirect effect—via
encouraging entrenchment, which then encourages extra-constitutionality—is not
accounted for. Consistent with this observation, if one removes the electoral variables
from the model, the coefficient of EFRs increases substantially, as it is now free to
reflect both the indirect (entrenchment) pathway and the direct (commitment) pathway.
Of course, the estimates of EFRs’ effects, whether direct or indirect, are subject to
a variety of challenges—worries about the temporal correlation of errors, reverse
causality, and unobserved heterogeneity. In the remainder of the section, I consider
some of these issues in more depth.
Autocorrelation
To control for autocorrelation in political violence (cf. Londregan and Poole
1990), Model 2 adds the lagged dependent variable to the specification of Model 1.
While extra-constitutional successions in year t-1 do predict such successions in year t,
as would be expected, the effect of having an EFR is virtually unchanged.
30
Reverse Causality
Any worry about ―reverse causality‖ can be mitigated by noting that most of the
new budgetary reversions appearing in the dataset are colonial inheritances and, as
such, arguably exogenous (cf. La Porta, Lopez-de-Silanes and Shleifer 2008). In Africa,
for example, French colonies were much more likely than British colonies to possess
EFRs at independence, holding constant their per capita GDPs and various measures of
disorder. In these cases, EFRs look more as if they were randomly assigned (depending
on the vagaries of conquest), than as if they were self-selected.
To identify the effects of these exogenously inherited reversions, I examined
leadership transitions occurring under the first constitutions promulgated in countries
that attained independence after World War II. The results are displayed in Table 3,
Model 3, and show that EFRs had statistically significant effects that were substantively
even larger than in the full dataset.25
Omitted variables
Although Table 3 controls for various observable features of the political and
economic environment, the possibility of unobserved heterogeneity of course remains.
Let’s explicitly consider some possible omitted variables that might plausibly explain the
differences in violence observed between polities with and without EFRs.
The first is ―disorder.‖ Most arguments for strengthening the executive begin by
identifying some problems of disorder in the state and end by advocating a stronger
executive to combat them. So, one might imagine that states facing more severe
problems of disorder created EFRs (and otherwise increased the executive’s de jure
powers) and tried to stabilize the executive in office (anticipating the necessity for
25
One gets similar results using the first constitutions of all countries that became independent (a) any
time after World War I; or (b) any time after 1875.
31
unpopular actions). Yet, the original problems that generated these de jure powerful
and entrenched executives then persisted, producing violence.
The main problems with this line of argument are two. First, Model 3 in Table 3
focuses on cases in which budgetary reversions were plausibly exogenous to current
politics, and finds similar results. Second, the analyses in Table 3 control for two
measures of ―disorder:‖ a history of democratic breakdowns and lagged extraconstitutional successions (Model 2). One can add other standard measures of disorder
with similar results.
A second possible omitted variable is ―legal origin‖ (cf. La Porta, Lopez-deSilanes and Shleifer 2008). Perhaps a more general constellation of effects deriving
from each country’s legal origin drives the syndrome of effects documented here. To
address this concern, one can add to Model 1 a battery of dummy variables controlling
for legal origin. The result is that EFRs continue to have a statistically significant and
substantively similar effect.
Another omitted variable worry is that the indicator for EFRs stands in for
broader measures of executive power. For example, perhaps one can simply add the
standard measure of executive constraints from the Polity IV project and wash out the
effect of EFRs. As it turns out, however, even after controlling for executive constraints
(as measured by Polity IV), EFRs continue to have a statistically and substantively
similar effect.
As a final defense against omitted variables, one can include country fixed effects
in the analysis (see Model 4). The countries that change their budgetary reversions and
have at least 10 years of usable data number only 28, so the number of observations
included in this analysis is considerably smaller. However, as can be seen, the estimated
32
effect of EFRs from this essentially cross-temporal comparison is very similar to the
effects estimated using cross-sectional comparisons (as in Models 1 and 2).
The rise of democracy?
Suppose one accepts the Montesquieuan argument that EFRs facilitate autocracy.
Then, even taking a purely procedural view of ―democracy,‖ one’s view of its progress
over the last century and a half must change. To illustrate, consider Figure 3.
Figure 3 about here.
The large solid dots show how Huntington’s three waves of electoral democracy
play out in my sample of 166 countries, using the Boix-Miller-Rosato measure of
democracy. One sees the first wave, lasting from the late 19th century until 1925,
followed by the first authoritarian trough; the second wave, lasting from 1945 until the
early 1960s, followed by the second authoritarian trough; and the third wave, beginning
in the mid-1970s and continuing into the 21st century. The graph is a hopeful one, with
the percentage of the world’s polities enjoying electoral democracy reaching a new high
with the third wave.
The small open dots show the percentage of the world’s countries in each year
that were ―republics‖—defined as regimes with both strong vertical accountability
(electoral democracy by the Boix-Miller-Rosato measure) and strong horizontal
accountability (via LFRs). The graph is less hopeful. Republics crest in 1922, at 40% of
the sample countries, reach local minima in 1941 (19%) and 1967 (22%), and still fall
short of their peak level by the end of the time series.26
26
As in the previous section, I count EFRs in safe institutional contexts as LFRs. The lower curve
understates the percentage of republics somewhat, because some constitutions with EFRs have other
features that preserve the legislature’s ability to check spending and that have not yet been systematically
33
Conclusion
In Montesquieu’s view, the cornerstone of the separation of powers was the
legislature’s power over the purse. With this power intact, the legislature could wield a
―complete and effectual weapon…for obtaining a redress of every grievance‖ (as
Madison put it). With this power impaired, Montesquieu warned that ―there will no
longer be liberty.‖
Despite the centrality of the power of the purse in Enlightenment theories of
government, I am aware of no general theoretical analysis of how such power can be
secured against executive encroachment, no constitutional history of how often such
power has actually been secured, and no empirical investigation of the consequences
either way. In this paper, I have begun to fill these gaps in the literature.
My first goal has been to demonstrate theoretically how much the legislature’s
power of the purse depends on the budgetary reversion. To do so, I analyze the
budgetary influence of a cohesive legislative majority when it faces no restrictions on its
amendment powers and the executive lacks impoundment and virement powers. Even
under such favorable background conditions, the legislative majority’s bargaining
leverage depends greatly on the reversion, whenever (1) the majority can neither remove
the executive from office nor override executive objections to the budget; and (2) there
are no scope or duration limits on the reversion. Indeed, when the reversion is the
executive’s proposal, the legislative majority can be virtually powerless.
My second goal has been to provide a constitutional history of the evolution of
budgetary reversions in the world’s constitutions over the period 1875-2005. I have
shown that the power of the purse has been undone in most of the world’s new
accounted for in this analysis. Nonetheless, the curve already classifies an important subset of the
safeguarded EFRs as LFRs and the remaining safeguards are relatively rare.
34
legislatures—sometimes by rendering the legislature non-independent of the executive;
sometimes by abolishing or suspending the legislature’s key financial rights; and most
often by adopting an EFR in what I have dubbed ―dangerous‖ contexts. Of the 4,574
country-years classified as lacking effective legislative control over the purse in the
period 1946-2005, 22% are so classified because their members were controlled by the
executive, 16.5% because the legislature wholly lacked the traditional powers of the
purse, and 61.5% because an EFR was adopted in a dangerous institutional context.
My third goal has been to explore how well two competing views of the power of
the purse accord with actual political behavior. Montesquieu viewed the power of the
purse as essential to limited government. In contrast, advocates of EFRs have typically
argued that the power of the purse could safely be surrendered into the hands of the
executive, as long as s/he was electorally accountable. Concentrating fiscal authority in
the executive, moreover, would have advantages such as ending budgetary gridlock and
mitigating the fiscal common pool problem.
I document that EFRs correlate with more frequent use of extra-constitutional
means to attain political power. These correlations gibe with the Montesquieuan view
that, where the power of the purse flags, limited government is imperiled.
The road to entrenched and extractive executives depicted here involves an
important feedback loop between electoral authoritarianism and fiscal autocracy. On
the one hand, it becomes more difficult to keep elections free and fair, when fiscal power
is more concentrated in the executive’s hands—because the executive may extract rents
and use them to buy votes. Recognizing this threat, English parliamentarians jealously
guarded their fiscal prerogatives and, on top of that, fought a century-long battle to limit
the executive’s ability to use public funds in order to influence either members’ votes in
35
Parliament or citizens’ votes in elections (cf. Foord 1947; Kemp 1957). On the other
hand, it becomes more difficult to limit the executive’s rents as elections become less
accurate reflections of popular judgments upon the government’s performance. For, the
expected electoral penalty for any level of rent extraction shrinks, as elections are more
effectively rigged.
EFRs can trigger this malignant feedback between electoral authoritarianism and
fiscal autocracy. For, when introduced, EFRs can substantially increase executives’ de
jure ability to extract rents. They can use their expanded rents to erode the integrity of
the electoral process; and use each decrement in electoral integrity to extract more
money with greater impunity. There has recently been a lot of work focusing on
electoral manipulation after the third wave (e.g., Schedler 2002, 2006; Hyde 2011). But
the synergies between electoral and fiscal authoritarianism have been relatively
neglected.27
The policy implications of the findings presented here also merit consideration.
If one seeks to promote good governance, then it may be just as important to ensure that
the budgetary reversion does not favor the executive too much—thereby preserving the
legislature’s power over the purse—as it is to ensure that the electoral process is not too
easily manipulated by the executive.
27
My emphasis on synergies between the electoral and fiscal processes complements the analysis of
Persson, Roland and Tabellini (1997). They assume that elections are free and fair, that the budgetary
reversion is something like a government shutdown, and that politicians cannot undo either of these
constraints. Given those exogenously fixed conditions, they show how a sequential budgetary process
similar to the one studied here can help voters keep politicians’ rents low. Their punchline is that the
separation of powers can enhance the electorate’s ability to limit rent extraction. Here, the punchline is
that removing the cornerstone of the separation of powers can ultimately ruin the electorate’s ability to
limit rent extraction.
36
References
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Table 1: The stages of a generic budgetary process
Stage 1: Legislature
chooses to…
Stage 2: Executive
chooses to…
Stage 3: Legislature
chooses to…
Final budgetary
outcome
Accept executive’s
initial proposal, xE
-
-
xE
Reject executive’s
initial proposal, xE
-
-
xR
Accept the budget
as amended
-
xL
Sustain the veto
xR
Override the veto
xL
Amend executive’s
proposal to xL
Veto the budget
Table 2: EFRs and extra-constitutional leadership succession, 18752004
All countries
Reversion at t-1 is
executive’s
proposal
Reversion at t-1 is
last year’s budget
Reversion at t-1 is
a government
shutdown
Democracies at t-1
40.0% (of 300)
Non-democracies
at t-1
48.6% (of 214)
26.3% (of 571)
29.6% (of 452)
13.2% (of 106)
9.7% (of 1010)
21.7% (of 323)
4.1% (of 687)
18.8% (of 85)
Note: Cell entries give the percentage of country years in each cell that experienced extraconstitutional successions (along with the total number experiencing any succession). For
example, there were 300 country-years such that (a) the country’s reversion (at the beginning of
the year) was the executive’s proposal; and (b) the country experienced a leadership succession
in that year. In 40.0% of these cases, at least one new leader entered power by irregular means.
The sum of the number of non-democracies at t-1 and democracies at t-1 does not always equal
the number of all countries due to missing data on the democracy indicator for some t-1
observations.
43
Table 3: EFRs and extra-constitutional leadership turnover, 1875-2004
Dependent variable: Extra-constitutional leadership turnover
Independent variables
Model 1 Model 2 Model 3 Model 4
Reversion is an EFR at t-1 .60***
.59***
1.73**
.55*
(.22)
(.22)
(.88)
(.33)
No multi-party legislative .79***
.70***
.62
.77***
elections at t-1
(.22)
(.21)
(1.13)
(.30)
Electoral democracy at t-1 -.62***
-0.60*** -1.83**
-.88***
(.21)
(.21)
(.79)
(.29)
Growth rate
-2.36
-2.12
-1.42
-2.31
(1.48)
(1.47)
(18.41)
(1.69)
GDP per capita at t-1
-.26***
-.26***
-.16
-.14*
(.07)
(.06)
(.16)
(.08)
Number of previous
.36**
.35**
1.38
breakdowns in
(.14)
(.14)
(1.24)
democracy at t-1
Percent of polities
.10***
.09***
.20
.07
experiencing extra(.03)
(.03)
(.20)
(.05)
constitutional succession
at t-1
Extra-constitutional
.69**
turnover at t-1
(.29)
Country fixed effects?
No
No
No
Yes
Regional fixed effects?
Yes
Yes
Yes
No
Number of observations
1513
1511
78
700
2
Pseudo R
.29
.30
.40
.22
p value
.0000
.0000
.0000
.0000
*** p value < .01; ** p value < .05; * p value < .10
Notes: The sample in Models 1 and 2 is all country-years with any leadership turnover
in the dataset. The sample in Model 3 covers leadership transitions occurring under the
first constitutions adopted by countries that secured independence after World War II.
Model 4 includes country fixed effects and thus all countries with no change of reversion
are dropped from the sample (which is otherwise identical to Model 1’s).
44
20
40
60
80
100
Figure 1: Number and percentage of constitutions with EFRs
1850
1900
1950
2000
year
N of constitutions with EFRs
Percent with EFRs
40
50
60
70
80
90
Figure 2: Percentage of constitutions with EFRs, by cohort
1850
1900
1950
year
2000
45
10
20
30
40
50
60
Figure 3: Democracies and Republics, 1875-2005
1850
1900
1950
year
Percent democracies
Percent republics
2000