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Do Electoral Systems Affect Government Size?
by Patrick Basham
CATO Institute
June 9, 2004
In the midst of an election campaign heaving with policy
platitudes, focus group-tested sound bites, and negative ads
targeted at voters in purple states, one is reminded of Winston
Churchill's observation that "democracy is the worst form of
government except all those other forms that have been tried."
The same may be said about our electoral system, which allocates
legislative seats on a first-past-the-post, winner-takes-all basis.
The current system has many disadvantages, most notably its
propensity to discriminate against minor parties operating outside
the increasingly uncompetitive, cozy two-party system.
However, new research suggests that, in terms of policy outcomes,
America's winner-takes-all electoral system may be the least bad
option for those seeking to limit government involvement in the
nation's economic life.
Economists Torsten Persson and Guido Tabellini recently studied how
electoral rules influence government fiscal policy. Their findings
were published in the American Economic Review. Specifically, they
measured the effect of electoral rules on the size and composition
of government spending. Persson and Tabellini compared policy
outcomes in 140 democracies.
They found that electoral systems affect fiscal policy. In general,
there is higher taxation and more government spending under a
European-style proportional representation (PR) system, which
allocates legislative seats based on a party's percentage of the
overall vote, than under a winner-takes-all system.
European PR systems tilt the composition of government spending
toward programs that benefit large groups in the population, such
as universal welfare programs. By contrast, the size of the minimal
coalition of voters needed to win the election is smaller under a
winner-takes-all system, which induces politicians to target
smaller, but pivotal, constituencies.
According to the international evidence, a switch from PR to
winner-takes-all reduces total government spending by approximately
5 percent of GDP. These effects are particularly pronounced in
freer and older democracies. In PR democracies, in particular,
government spending displays a "ratchet effect," i.e., it goes up
as a fraction of GDP during economic downturns, but it doesn't come
down during economic upturns.
The electoral system also affects the size of the budget deficit.
Under a winner-takes-all system, deficits are smaller (about 3
percent of GDP) than under PR. A reform of the electoral system
from winner-takes-all to European-style proportional rule would
increase government spending by about 6 percent of GDP, financed by
higher taxes and deficits.
Persson and Tabellini also ask whether winner-takes-all electoral
rules cut welfare spending? They present evidence that
winner-takes-all systems encourage a smaller welfare state than
otherwise would be the case. Winner-takes-all elections cut welfare
spending by 2 to 3 percent of GDP. Again, the effect is stronger in
the older and freer democracies.
The fact that winner-takes-all electoral systems lead to smaller
governments and smaller welfare programs than PR systems does not
negate the deficiencies inherent in our current system. However, it
does serve as a timely reminder that each electoral system produces
a unique set of pros and cons.
As Churchill knew, there is no perfection in politics. The authors
of our Constitution certainly didn't provide us with a perfect
electoral system. Nevertheless, our electoral system reinforces the
Constitution's central theme of limited government.
Let's not spend time figuring out how to swap our electoral system
for an equally flawed, if differently configured, European
electoral system. Instead, let's focus our reformist energies on
disentangling the regulatory thicket that currently depresses the
competitive nature of our own, increasingly undervalued, system.
Patrick Basham is senior fellow in the Center for Representative
Democracy at the Cato Institute