Can the Debt Growth Be Stopped?: Rules-Based Policy Options for Addressing the Federal Fiscal Crisis

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Lexington Books, Mar 1, 2016 - Business & Economics - 204 pages
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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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Contents

A New Era of Fiscal Rules
1
Economic Analysis of Fiscal Rules
9
Case Studies Fiscal Rules in Switzerland and Sweden
19
Fiscal Rules in the United States
45
Should the United States Go Swiss?
73
Designing a New Fiscal Rule for the United States
89
Toward a New Budget Process
113
The Political Economy of New Fiscal Rules
131
Appendix
151
References
169
Index
181
About the Authors
191
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About the author (2016)

John D. Merrifield is professor of economics at the University of Texas at San Antonio.

Barry W. Poulson is emeritus professor of economics at the University of Colorado.

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