Do voters remain loyal to the party that makes them richer? Usually, that is what politicians hope. Government spending and transfers often buy electoral support. But what happens when a transfer succeeds so well that it changes what its beneficiaries want from government?
A new study by Mathias Bühler (LMU Munich, Project B08) and Jérôme Schäfer (European Parlament) examines an unusual experiment from the American New Deal. The Taylor Grazing Act (TGA) of 1934 ended open access to 142 million acres of western rangeland and gave established ranchers renewable grazing rights tied to their private farms. These rights were valuable: they secured access to cheap grazing, encouraged investment, and raised the value of the farms to which they were attached. By 1950, farms in treated counties had gained about $9,500 in value relative to farms in neighbouring non-grazing areas – an enormous increase relative to pre-Act farm values.
At first, the politics worked exactly as conventional theories of distributive politics would predict. Counties affected by the Act moved toward the Democrats, who had enacted it. The Democratic vote-share gain peaked at 3.7 percentage points in 1940. Then something changed. Between the 1940 and 1942 elections, the estimated effect fell by more than five percentage points and remained negative through 1950.
The crucial clue is where support eroded. Before the Act, some ranching counties carried substantially more mortgage debt than others. Because equity is what remains after debt is subtracted from an asset’s value, the same increase in farm values produced a larger proportional improvement in net worth for highly leveraged farmers. And that is where the political response was strongest. Low-debt TGA counties continued to reward Democrats; the erosion of Democratic support was concentrated among the most highly leveraged counties. Across the leverage distribution, the shift becomes clearly negative only in the most indebted quartile.
Why did this happen only several years after the Act? The timing points to an interaction between policy and markets. The TGA created a valuable asset, but farm values had risen only modestly by 1940. World War II then sent cattle and wool prices sharply upward. The resulting commodity boom capitalised the rights created by the TGA into much larger farm values. Importantly, livestock counties outside TGA areas experienced the same wartime boom without the same political reversal. The evidence therefore points to two complementary shocks: the TGA created the asset; wartime demand made it valuable enough to change political incentives.
Could ranchers simply have forgotten who helped them, or become generally hostile to government? Additional evidence cuts against both explanations. Counties whose own representatives voted for the TGA subsequently moved more, not less, against the Democrats, inconsistent with a simple gratitude mechanism. Gallup surveys likewise show no lasting general shift against government intervention among farm households in TGA states. Instead, the available survey evidence is more consistent with voters distinguishing between policies according to their own material interests – although the surveys are not precise enough to establish that mechanism on their own.
The broader lesson is that not all transfers create the same politics. A cash payment can make recipients want the program to continue. An asset transfer can instead change their economic position permanently. If it makes beneficiaries sufficiently wealthier, it can change what they stand to gain from future redistribution. A government can therefore succeed economically and, precisely because it succeeds, undermine the political coalition that made the policy possible.
Link (pdf): Wealth Transfers Erode the Coalition That Enacted Them
