Dr. Jeff Sheldon discusses various topics from a LSE public policy analysis course: the impact of decentralisation and electoral incentives

Introduction

Between 31 January and 16 April 2024 I took a ten week, 80+ hour graded course from the London School of Economics and Political science (LSE) in public policy analysis. In this series, presented in the order of the ten LSE course modules, I offer up selections of my writings from across the course that include topics in economics, institutions, policy, statistics, policy evaluation, and politics, etc. Most are an answer to a prompt or question (provided if applicable), and vary between 250 and 800 words in length, short but hopefully insightful. As always, you might not agree or agree only in part with my answers or assessments so feel free to engage me in dialogue, it will be most welcome. Likewise, if you’d like context, please don’t hesitate to ask. Enjoy!

The impact of decentralisation and electoral incentives

In the ninth unit of this course we learnt about the impact of decentralisation and electoral incentives on public policy. Here I discuss, through the responses to three questions, how these factors influence public policy in my context using the United States Department of Education as an example.

Question 1: How centralised or de-centralised is spending and decision-making in your context?

Answer 1: The US system of government combines elements of both centralization and decentralization as there is spending and decision-making that is solely within the purview of the federal government (e.g., national defence, foreign policy, border control, monetary policy via the Federal Reserve, etc.), and some that is better suited to the states or designated entities therein (e.g., education, public health, transportation, and criminal justice). Here’s an interesting case combining centralization and decentralization. The US congress approves funding for the US Department of Education (DoE) which sets national education policy and oversees a myriad of grant-funded education programs which are subsequently administered by state education agencies, local education agencies, or other educational entities at the local level. The DoE has an imprimatur to decide how to allocate congressionally approved funds programmatically, then, further determines how much funding a state education agency, local education agency, or other educational entity might receive based on a pre-determined amount set by the DoE (an “up to” amount). For example, the DoE uses congressional provided funds in the form of block grants for a program called 21st Century Community Learning Centers. State departments of education apply for a block grant and if successful, set up a grant competition of its own to which local education agencies and other educational entities can apply – federal funds are passed to the state, which are then passed to local programs which administer the funds accordingly. Overall, some policies appear to be highly centralized, while others, as in the case presented provide significant discretion to states and localities.

Question 2: What are the positive and negative impacts of this constitutional design on public policy??

Answer 2: Centralization is great for a number of reasons. First, it can be very efficient in that it streamlines coordination and implementation of policies across different regions. In the case provided above, the DoE offers a Funding Offer Announcement (FOA) as a coordinated effort at providing information to potential grantees regarding what the program is about, how to apply, what to include in the application, etc. to ensure that only eligible entities apply and the program is implemented to achieve similar outcomes across the country. Centralization also provides standardization. Every state education agency receiving a block grant must use the same metrics for evaluating impact, use the same accounting procedures, use the same reporting mechanisms, target the same populations, use the same local grantee selection criteria, etc. The problem with centralization is it’s bureaucratic in that it can lead to inefficiencies in decision-making, for example, immediate corrective actions grantees need to take. Decentralization can be good. If the DoE provided grant funding directly to local education agencies with relatively few strings other than having a spending plan it would offer flexibility in responding to local needs and preferences enabling the community to tailor policies and services to specific circumstances. Determining local needs and preferences would encourage citizen engagement and participation in the decision-making process to determine which programs to implement or how to best allocate funds. However, the problem is if the DoE provides funding to local education agencies across the country to solve what it has determined to be very specific problems, then without a standardized approach there could be fragmentation resulting in inefficiencies and disparities in the extent to which those problems are actually solved.

Question 3: Can you identify other instances where decisions regarding government spending were shaped by political goals in similar ways, either before or after elections??

Answer 3: One specific example in the United States was the American Recovery and Reinvestment Act (ARRA) of 2009 (American Recovery and Reinvestment Act of 2009, 2009). According to both Romer and Romer (2010), and Blinder and Zandi (2010), prior to the 2008 presidential election the US was facing an economic downturn, high unemployment rates, and a looming financial crisis. Then presidential candidate Obama campaigned on a promise of implementing a large-scale stimulus package to jumpstart the economy, very much in-line with the Democratic Party's broader goal of using government intervention to stimulate economic growth and create jobs. After winning the election, President Obama and the Democratic-controlled Congress immediately passed the ARRA with the primary objective of stimulating economic activity and mitigating the impact of the recession. The $787 billion provided by the ARRA was used to that end on infrastructure projects, education, healthcare, renewable energy initiatives, and tax cuts, among other provisions. However, fund allocation within the ARRA was heavily influenced by political considerations in that certain provisions were included or modified to secure the support of key constituencies and lawmakers to maximize political capital and ensure passage through Congress.

References

American Recovery and Reinvestment Act of 2009, Pub. L. No. 111-5, 123 Stat. 115 (2009).

Romer, C. D., & Romer, D. H. (2010). The macroeconomic effects of tax changes: Estimates based on a new measure of fiscal shocks. American Economic Review, 100(3), 763-801.

Blinder, A. S., & Zandi, M. (2010). How the Great Recession was brought to an end. In: Alan S. Blinder & Mark Zandi (Eds.), The Financial Crisis of 2008 and the Obama Administration: Macroeconomic Perspectives (pp. 385-442). Russell Sage Foundation.

Thanks for reading. Please feel free to ask questions or offer comments below. Next up: comparing policy solutions.