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Budget windows, sunsets, and fiscal control

  • Auerbach, Alan J.

Governments around the world have struggled to find the right method of controlling public spending and budget deficits. In recent years, the United States has evaluated policy changes using a ten-year budget window. The use of a multi-year window is intended to capture the future effects of policies, the notion being that a budget window that is too short permits the shifting of costs beyond the window's endpoint. But a budget window that is too long includes future years for which current legislation is essentially meaningless, and gives credit to fiscal burdens shifted to those whom the budget rules are supposed to protect. This suggests that there may be an "optimal"budget window, and seeking to understand its properties is one of this paper's main objectives. Another objective is to understand a phenomenon that has grown in importance in U.S. legislation -- the "sunset." This paper argues that, with an appropriately designed budget window, the incentive to use sunsets to avoid budget restrictions will evaporate, so that temporary provisions can be taken at face value. The analysis also has implications for how to account for long-term term budget commitments.

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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 90 (2006)
Issue (Month): 1-2 (January)
Pages: 87-100

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Handle: RePEc:eee:pubeco:v:90:y:2006:i:1-2:p:87-100
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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  1. Tabellini, Guido & Alesina, Alberto, 1990. "A Positive Theory of Fiscal Deficits and Government Debt," Scholarly Articles 3612769, Harvard University Department of Economics.
  2. Jagadeesh Gokhale & Kent Smetters, 2003. "Fiscal and generational imbalances: new budget measures for new budget priorities," Policy Discussion Papers, Federal Reserve Bank of Cleveland, issue Dec.
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