The Allocation of the US Federal Budget to the States: Evidence on the Power of the Purse∗

This paper provides new evidence on the determinants of the allocation of the US federal budget to the states. Departing from the existing literature that gives prominence to Congress, we carry on an empirical investigation on the influence of the President. Our findings suggest that the President has a strong influence on the distribution of federal outlays to the States. First, the presidential race matters. States that heavily supported the incumbent President in past presidential elections tend to receive more funds, while marginal and swing states are not rewarded. Second, States whose governor has the same political affiliation of the President receive more federal funds, while states opposing the president’s party in Congressional elections are penalized. These results also provide good evidence in support of partisan theories of budget allocation