Deficits, Debt, and Democracy

Deficits, Debt, and Democracy

Wrestling with Tragedy on the Fiscal Commons

Richard E. Wagner

This timely book reveals that the budget deficits and accumulating debts that plague modern democracies reflect a clash between two rationalities of governance: one of private property and one of common property. The clashing of these rationalities at various places in society creates forms of societal tectonics that play out through budgeting. The book demonstrates that while this clash is an inherent feature of democratic political economy, it can nonetheless be limited through embracing once again a constitution of liberty.

Preface

Richard E. Wagner

Subjects: economics and finance, public choice theory, public finance, politics and public policy, public choice

Extract

While living within a budget can be difficult, most people manage to do it most of the time. Even elected legislators seem to do this with their personal accounts, as we rarely hear of them having persistent financial difficulties. It is different, however, when it comes to their legislative activities. There, the budgets they create are often in deficit. Yet as a formal matter, budgeting is the same whether it is done by a single person or a group of people. It is a simple arithmetical matter to keep revenues and expenditures more or less in balance, even if doing so might not be pleasant, perhaps because, among other things, it might entail some accumulation of reserves that otherwise could be spent on any number of desired objects. In politics, however, surpluses seem to be short-lived at best. The USA ran budget surpluses for 1998–2002, and Canada and Sweden have done so recently. Still, deficits are the norm in democratic regimes. When much attention was given to the sense of crisis within the EU during the spring and summer of 2010 in the presence of Greece’s budget deficit that exceeded 10 percent of GDP, the American deficit was even larger relative to GDP. Politics, of course, involves groups of people and not individuals. Group budgeting requires the additional step of securing some degree of agreement among the participants which is not necessary for individual budgeting. This group context, however, cannot account for the difference in budgetary outcomes because people...