Politics and the distribution of federal funds: Evidence from federal legislation in response to COVID-19

• Published in: Journal of public economics 2021-12, Vol.204, p.104554-104554, Article 104554
• Main Authors: Clemens, Jeffrey, Veuger, Stan
• Format: Article
• Language: English
• Subjects: COVID-19; Fiscal federalism; Intergovernmental Grants; Politics; State and local budgets
• ISSN: 0047-2727; 1879-2316; 0047-2727
• DOI: 10.1016/j.jpubeco.2021.104554

•We provide evidence of substantial small-state and partisan biases in federal support for state and local governments during the COVID-19 pandemic.•An additional Senator or Representative per million residents predicts an additional 670 dollars in aid per capita across the four relief packages.•Alignment with the Democratic party predicts increases in states’ allocations through legislation designed after the January 2021 political transition.•This benefit of alignment with a unified federal government operates through the American Rescue Plan Act’s size and through the formulas it used to distribute transportation and general relief funds. COVID-19 relief legislation offers a unique setting to study how political representation shapes the distribution of federal assistance to state and local governments. We provide evidence of a substantial small-state bias: an additional Senator or Representative per million residents predicts an additional 670 dollars in aid per capita across the four relief packages. Alignment with the Democratic party predicts increases in states’ allocations through legislation designed after the January 2021 political transition. This benefit of alignment with a unified federal government operates through the American Rescue Plan Act’s size and through the formulas it used to distribute transportation and general relief funds.