Politics and Deficit Finance
AbstractThe government faces both economic and political constraints on its ability to raise revenue. Political factors can limit the government's revenue-generating ability to levels below those dictated by economic constraints. Taxation is more directly constrained by the political process than deficit finance because taxes are voted on directly by the legislature. Deficits are a residual that results from the aggregation of all tax and expenditure bills. Increased electoral safety weakens the political constraint against deficit finance because the only electoral check on deficit finance occurs when representatives run for reelection. Empirical estimates show that the increased security of incumbents has contributed to increases in deficit finance and has increased the overall level of public expenditures.
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Bibliographic InfoPaper provided by Department of Economics, Florida State University in its series Working Papers with number 1992_03_1.
Length: 18 pages
Date of creation: 1992
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- Thomas A. Garrett & Andrew F. Kozak & Russell M. Rhine, 2010.
"Institutions and government growth: a comparison of the 1890s and the 1930s,"
Federal Reserve Bank of St. Louis, issue Mar, pages 109-120.
- Thomas A. Garrett & Russell M. Rhine, 2008. "Institutions and government growth: a comparison of the 1890s and the 1930s," Working Papers 2008-020, Federal Reserve Bank of St. Louis.
- Randall Holcombe, 2005. "Government growth in the twenty-first century," Public Choice, Springer, vol. 124(1), pages 95-114, July.
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