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.

Chapter 6: Taxation, Fiscal Politics, and Political Pricing

Richard E. Wagner

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


Joseph Schumpeter (1918 [1954]) asserted that “the budget is the skeleton of the state stripped of all misleading ideologies.” Behind the budget we find politics in its myriad forms, including conflict, compromise, and eristic posturing, along with some calm, rational examination of options. Within theories of political economy and public finance, budgeting has been largely presented as an activity within a homogeneous and harmonious society, which, of course, is the only possibility within analytical frameworks based on representative agents or population averages. Sure, the standard presentation of the theory allows scope for heterogeneity of a limited type which by assumption gives people room to settle differences among themselves in mutually agreeable fashion. This standard presentation is surely more a feature of the ideological subtext of a particular type of model than it is a feature of the reality the model seeks to address. In this respect, it has sometimes been asserted that the domain of market activity begins when political interest in the activity in question vanishes. Market activity describes processes of societal organization in which people relate to one another through the legal principles we recognize as private property and liberty of contract. These principles mean that, if there are people who dislike the actions you undertake, they forbear from interfering with you all the same. If you open a retail store, existing operators of retail stores will not try to stop you. If you decide to grow tobacco and produce cigarettes, other people will not try to prevent...

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