Politics of Rational Decision-making: The Effect of Political Alignment on Revenue Forecasts

Abstract

Bureaucrats often operate within politically influenced contexts. Despite the persistent scholarly interest in political congruence across executive and legislative bodies, its effect on bureaucratically reasoned decisions is open to debate. We address an increasingly important question: What political environment promotes rational decision-making? Theoretically, we propose two contrasting models to predict how partisan alignment between political principals affects the accuracy of their agents’ decisions (i.e. revenue forecasting): political support and political competitiveness. Using data on US state governments from 2001 to 2017, we find empirical support for the political competitiveness model, indicating its contribution to the precision of agents’ rational choices within a competitive regime. When a governor’s partisanship aligns with the state legislature, public officials tend to produce less accurate revenue forecasts. The findings offer implications for the interplay between political context and bureaucratic reasoning, highlighting the nature of democratic governance for effective decision-making processes.