Veto Institutions, Hostage-Taking, and Tacit Cooperation

The forthcoming article “Veto Institutions, Hostage-Taking, and Tacit Cooperation” by Justin Fox and Mattias Polborn is summarized by the authors below.

In political systems with a strong separation of powers, the executive often has some veto power over legislation. With an absolute veto (AV) — similar to what the U.S president and several governors have — the executive can either veto a bill wholesale, or not at all. Other executives have a line-item veto (LIV) under which they can block specific parts of a bill, while letting other parts pass. In our article, “Veto Institutions, Hostage-taking, and Tacit Cooperation,” we consider the strengths and weaknesses of both AV and LIV, and also propose a new veto institution that improves upon both of them. 

We focus on the case of divided government in which different parties control the legislature and the executive. In our model, the legislature can combine various “projects” into a single bill. Some projects are “universal,” providing a positive payoff to both parties. Others are “partisan,” benefiting one party at the expense of the other.  

The two veto systems described above each have some problems. Under AV, the legislature can bundle universal projects with ones that benefit only itself. This way, universal projects are “held hostage,” effectively undercutting the executive’s veto power: A veto of the bundled bill would not only kill the partisan projects that harm the executive, but also the universal projects valued by both sides. Furthermore, the more valuable the universal projects are for everyone, the more partisan pork the legislature can load into a bill while still shielding it from a veto. 

While the LIV eliminates this type of hostage-taking, it does so at the expense of preventing mutually beneficial “log rolls.” Sometimes, both parties can gain from implementing a package where each party gets some of their preferred partisan projects. However, the legislature would have to fear that, if they passed such a bundle, the executive would simply line-item veto those parts that benefit the legislature while leaving intact those that benefit the executive. Consequently, mutually beneficial compromise bills may go unrealized under the LIV. 

We then design a novel institution, the alternating line-item veto (ALIV), under which proposed bills alternate between legislature and executive, with each having the power to delete parts of the previous version and returning the remaining parts to the opponent, or deciding to accept the opponent’s latest proposal. We show that ALIV can eliminate hostage-taking while also preserving beneficial inter-party log-rolls. Although the ALIV is currently, to our knowledge, not implemented anywhere, some countries in Latin America operate under a related system. 

Finally, we analyze how the different veto institutions perform in a dynamic setting where power fluctuates, and the government is sometimes united and sometimes divided. Here, we identify a range of conditions under which the LIV best facilitates inter-party cooperation. This dynamic effect also explains why numerous empirical studies have found that, contrary to expectations, the LIV has little impact on government spending. 

About the Authors: Justin Fox is an Associate Professor of Political Science at Washington University in St. Louis and Mattias Polborn is a Professor of Economics and Political Science at Vanderbilt University. Their research “Veto Institutions, Hostage-Taking, and Tacit Cooperation” is now available in Early View and will appear in a forthcoming issue of the American Journal of Political Science.

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The American Journal of Political Science (AJPS) is the flagship journal of the Midwest Political Science Association and is published by Wiley.