Can the Debt Growth Be Stopped?: Rules-Based Policy Options for Addressing the Federal Fiscal Crisis
This book explores new fiscal rules introduced in OECD countries and the relevance of fiscal rules for the unique fiscal policies and institutions in the United States. The rules in different countries are compared, with a more in depth analysis of two countries with arguably the most successful fiscal rules—Switzerland and Sweden. The study compares the challenge of fiscal consolidation facing the U.S. with that in other OECD countries. The centerpiece of the study is analysis of fiscal rules using a dynamic simulation model. A Swiss style fiscal rule is compared to an alternative fiscal rule proposed by Representative Amash, H.J.Res 24.The authors propose a new fiscal rule designed for the unique fiscal institutions in the U.S. Dynamic scoring is used to measure the impact of different fiscal rules on the federal budget, economic growth, and revenue. The effectiveness of the different fiscal rules is analyzed with respect to several criteria. A major objective of the rules is fiscal stabilization in the long run to bring debt/GDP ratios below tolerance levels. The fiscal rules are also designed for budget stabilization in the medium term, such that deficits in periods of recession are offset by surplus revenue in periods of economic expansion. The concluding section of the study explores the political economy of enacting new fiscal rules in the U.S. The study proposes fundamental changes in budget process required for the proposed fiscal rule to be effective. The study concludes with a discussion of alternative routes to enacting new fiscal rules, and the prospects for new fiscal rules to be enacted in the U.S.
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achieve Amash rule balanced budget amendment balanced budget rule bill Brady Bill brake multiplier budget process business cycle cantons Congress constrain spending countercyclical debt/GDP ratio decades deficit brake deficits and debt designed direct democracy discretionary fiscal policy discretionary spending dynamic scoring economic growth effective fiscal rules emergency fund emergency spending enforcement entitlement programs entitlement spending expenditure limit expenditure rules federal government federal spending finance fiscal adjustment Fiscal Responsibility Council fiscal stabilization Fund Spending Geier impact implement imposed income increase initiative and referendum investment spending legislators long run long term major mandate Medicare monetary policy MP rule National Debt OECD countries output PAYGO percent of GDP periods of recession proposed fiscal rule rate of growth Rev GDP/GDP share of GDP simulation-revised Social Security spending cap multiplier spending growth spending limit surplus revenue surplus target sustainable fiscal policy Swiss debt brake Switzerland and Sweden Taylor Taylor Rule U.S. Constitution United