Advanced Search
MyIDEAS: Login

The Case for a New Fiscal Constitution

Contents:

Author Info

  • William A. Niskanen
Registered author(s):

    Abstract

    For 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 Info

    If 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.
    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.6.2.13
    Download Restriction: no

    Bibliographic Info

    Article provided by American Economic Association in its journal Journal of Economic Perspectives.

    Volume (Year): 6 (1992)
    Issue (Month): 2 (Spring)
    Pages: 13-24

    as in new window
    Handle: RePEc:aea:jecper:v:6:y:1992:i:2:p:13-24

    Note: DOI: 10.1257/jep.6.2.13
    Contact details of provider:
    Email:
    Web page: http://www.aeaweb.org/jep/
    More information through EDIRC

    Order Information:
    Web: http://www.aeaweb.org/subscribe.html

    Related research

    Keywords:

    Find related papers by JEL classification:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. 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..
    2. 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.
    3. Shah, Anwar, 2005. "Fiscal decentralization and fiscal performance," Policy Research Working Paper Series 3786, The World Bank.
    4. Anwar Shah, 2006. "Fiscal decentralization and macroeconomic management," International Tax and Public Finance, Springer, vol. 13(4), pages 437-462, August.
    5. Marco Battaglini & Stephen Coate, 2006. "A Dynamic Theory of Public Spending, Taxation and Debt," NBER Working Papers 12100, National Bureau of Economic Research, Inc.
    6. Frey, Bruno S., 2004. "Direct Democracy for a Living Constitution," Freiburg Discussion Papers on Constitutional Economics 04/5, Walter Eucken Institut e.V..
    7. 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.
    8. 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.
    9. 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.
    10. 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.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:aea:jecper:v:6:y:1992:i:2:p:13-24. See general information about how to correct material in RePEc.

    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.