Congressional Bargaining and the Distribution of Grants

• Published date: 01 August 2023
• Author: Leah Rosenstiel
• Date: 01 August 2023
• DOI: http://doi.org/10.1111/lsq.12411

471

LEGISLATIVE STUDIES QUARTERLY, 48, 3, August 2023

DOI: 10.1111/lsq.12411

LEAH ROSENSTIEL

Vanderbilt University

Congressional Bargaining and the

Distribution of Grants

In the United States, state and local governments receive over $700

billion annually in federal grants, yet relatively little is known about how

Congress designs these programs. I formalize a theory of congressional bar-

gaining over grants and test the theory using an original dataset of Senate

amendments. The results suggest that congressional rules and political con-

siderations shape, and at times distort, federal grant programs. While grant

programs may be intended to improve education or provide health care, I find

that members of Congress treat these programs as opportunities to procure

more funding for their constituents. Further, I show how coalitions are shaped

by the status quo policy and the distribution of population, poverty, and other

demographic characteristics across states. These results have important impli-

cations for our understanding of the policymaking process and who benefits

from federal programs.

“e rich get richer and the poor get poorer under the politi-

cally devised formula for the distribution of this aid.”

— Representative Ashbrook (111 Cong. Rec.

4236,1965)

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

major programs such as Medicaid, the Title I- A education pro-

gram, Temporary Assistance for Needy Families (TANF), Section

8 Housing Choice Vouchers, and the Community Development

Block Grant (CDBG). Grants- in- aid account for nearly a quarter

of all federal domestic spending and over half of state govern-

ment funding for health care and public assistance (Dilger and

© 2022 Washington University in St. Louis.

472 Leah Rosenstiel

Cecire 2019). Thus, to understand federal spending and federal

policy more broadly, it is essential to understand grants- in- aid.

How does Congress design grants- in- aid? Who benefits and

why? Existing theories highlight the role that congressional rules and

political considerations play in the distribution of federal funding.

The divide- the- dollar game by Baron and Ferejohn(1989) and its

generalization by Banks and Duggan(2006) show that legislators

with proposal or agenda- setting power receive a disproportionate

share of funding. Further, funds are only distributed to legisla-

tors that vote for the proposal (the winning coalition). And, when

proposals are brought up under a closed rule, the size of the win-

ning coalition is minimal (i.e., proposals pass by a bare majority).

Others have expanded this model to examine the effect of endog-

enous status quo policies (Kalandrakis2004), a unanimous voting

rule and heterogeneous discount rates (Anesi and Seidmann2015),

persistent agenda setters (Diermeier and Fong2011), endogenous

procedural rules (Duggan and Kalandrakis2012), and veto play-

ers (Nunnari2021).1

However, the Baron and Ferejohn model and nearly all of its

extensions allow for any distribution of the dollar, which does not

reflect how a substantial portion of the federal budget is allocated.

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 primar-

ily distributed based on statutory formulas that persist for many

years. With one notable exception (Martin2018), theories have not

considered how this zero- sum bargaining process is altered when

legislators must distribute funding via a formula based on observ-

able state characteristics.

To address this gap in the literature, I formalize a theory of

congressional bargaining over allocation formulas for grants- in-

aid and provide empirical evidence consistent with the theory. The

central intuition of my theory is that legislators design grant pro-

grams to benefit their constituents but are constrained by needing

to find a feasible formula that can pass under majority and super-

majority rules. The model is most closely related to framework de-

veloped by Martin(2018). Martin extends the Baron and Ferejohn

model to grant allocation formulas, focusing on how the number

of formula dimensions structures legislative bargaining. Martin

shows that when bargaining over a low- dimensional formula

(i.e., a formula based on a small number of state characteristics),