The Case for a New Fiscal Constitution
AbstractFor the first 140 years of U.S. history, the federal budget was effectively constrained by two fiscal rules: the formal limits within the Constitution on the enumerated spending powers and an informal rule that the government could borrow only during recessions and wars. At the end of the 1920s, federal expenditures were 2.6 percent of GNP. The federal debt was constrained to about equal to 16 percent of GNP. The general price level was roughly stable over this long period. Over the past six decades, however, federal expenditures have increased to nearly 25 percent of GNP. Larger and more frequent budget deficits have increased the federal debt held by the public to an amount equal to about 50 percent of GNP. And the general price level is now about nine times the level at the beginning of this period. This dramatic change in fiscal and monetary conditions occurred without one amendment to the Constitution to authorize a change in the fiscal rules. Our effective fiscal constitution has been transformed into one in which Congress and the President may authorize any type or amount of expenditures and taxes, subject only to the voting rules for routine legislation. How did this happen? Should economists be concerned about this change in the fiscal constitution? What, if anything, should be done about it?
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by American Economic Association in its journal Journal of Economic Perspectives.
Volume (Year): 6 (1992)
Issue (Month): 2 (Spring)
Find related papers by JEL classification:
- H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
- A11 - General Economics and Teaching - - General Economics - - - Role of Economics; Role of Economists
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Anwar Shah, 2006. "Fiscal decentralization and macroeconomic management," International Tax and Public Finance, Springer, vol. 13(4), pages 437-462, August.
- Marco Battaglini, 2009.
"On the Case for a Balanced Budget Amendment to the U.S. Constitution,"
2009 Meeting Papers
131, Society for Economic Dynamics.
- Marina, Azzimonti & Marco, Battaglini & Stephen, Coate, 2010. "On the Case for a Balanced Budget Amendment to the U.S. Constitution," MPRA Paper 25935, University Library of Munich, Germany.
- Bruno S. Frey & Alois Stutzer, .
"The Role of Direct Democracy and Federalism in Local Power,"
IEW - Working Papers
209, Institute for Empirical Research in Economics - University of Zurich.
- Bruno S. Frey & Alois Stutzer, 2004. "The Role of Direct Democracy and Federalism in Local Power," CREMA Working Paper Series 2004-25, Center for Research in Economics, Management and the Arts (CREMA).
- Wohlgemuth, Michael & Sideras, Jörn, 2004. "Globalisability of Universalisability? How to apply the Generality Principle and Constitutionalism internationally," Freiburg Discussion Papers on Constitutional Economics 04/7, Walter Eucken Institut e.V..
- Stephen Coate & Marco Battaglini, 2007.
"A Dynamic Theory of Public Spending, Taxation and Debt,"
2007 Meeting Papers
573, Society for Economic Dynamics.
- Marco Battaglini & Stephen Coate, 2008. "A Dynamic Theory of Public Spending, Taxation, and Debt," American Economic Review, American Economic Association, vol. 98(1), pages 201-36, March.
- Marco Battaglini & Stephen Coate, 2006. "A Dynamic Theory of Public Spending, Taxation and Debt," NBER Working Papers 12100, National Bureau of Economic Research, Inc.
- Marco Battaglini & Steve Coate, 2006. "A Dynamic Theory of Public Spending, Taxation and Debt," Levine's Bibliography 122247000000001094, UCLA Department of Economics.
- Battaglini, Marco & Coate, Stephen, 2007. "A Dynamic Theory of Public Spending, Taxation and Debt," Working Papers 07-04, Cornell University, Center for Analytic Economics.
- Marco Battaglini & Stephen Coate, 2006. "A Dynamic Theory of Public Spending, Taxation and Debt," NajEcon Working Paper Reviews 321307000000000026, www.najecon.org.
- Marco Battaglini & Stephen Coate, 2007. "A Dynamic Theory of Public Spending, Taxation and Debt," Discussion Papers 1441, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Adam Geršl, 2005.
"Political Economy of Public Deficit: Perspectives for Constitutional Reform,"
Working Papers IES
98, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised 2005.
- Adam Geršl, 2007. "Political Economy of Public Deficit: Perspectives for Constitutional Reform," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 1(1), pages 67-86, March.
- Frey, Bruno S., 2004. "Direct Democracy for a Living Constitution," Freiburg Discussion Papers on Constitutional Economics 04/5, Walter Eucken Institut e.V..
- Steve Hanke, 2003. "Money and the rule of law in ecuador," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 6(3), pages 131-145.
- Dennis Mueller, 1999. "Fundamental Issues in Constitutional Reform: With Special Reference to Latin America and the United States," Constitutional Political Economy, Springer, vol. 10(2), pages 119-148, June.
- Shah, Anwar, 2005. "Fiscal decentralization and fiscal performance," Policy Research Working Paper Series 3786, The World Bank.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros) or (Michael P. Albert).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.