The Line Item Veto and Public Sector Budgets: Evidence from the States

Douglas Holtz-Eakin

NBER Working Paper No. 2531
Issued in March 1988

Recent proposals assume that endowing the U.S. President with a line item veto will reduce spending. Analysis of a rich set of state budget data indicates that long run budgets are not altered by an item veto. In the short run, the item veto's potency is contingent upon the political setting. Governors with political incentives to use an item veto alter spending and revenues in a statistically significant and quantitatively important fashion. These results suggest that adoption of the line item veto, in general, is unlikely to reduce the size of the federal government.

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Published: "The Line Item Veto and Public Sector Budgets: Evidence from the States," Journal of Public Economics, vol. 36, pp. 269-292, 1988.

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