December, 2019

American Democracy and the Problem of Fiscal Deficits

  • Richard Wagner

    Distinguished Senior Fellow, F. A. Hayek Program for Advanced Study in Philosophy, Politics and Economics
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Most theorists of public finance treat budgeting as a technical problem centered on projecting revenues and expenses. In contrast, I treat budgeting as a political problem, with technical matters serving to obscure more than illuminate that problem. This essay starts by explaining why persistent budget deficits have little to do with technical matters because they mostly reflect the conflictual character of contemporary political economy. The rest of the essay probes this conflictual character by providing a conceptual framework grounded in the inherently complex character of fiscal systems, and with this complex character contrasting sharply with the image of simplicity advanced by most theorists of public finance. The key point I advance is that democratic budgeting, especially in large national governments, will more likely operate as a source of turbulence than as a source of systemic stability.