“The debt trajectory is the core concern of the fiscal framework. Given the uncertainties surrounding the macroeconomic determinants of debt developments and also that these macroeconomic variables are beyond the control of the government, though they are endogenously affected by
The United States faces a considerable challenge to achieve fiscal consolidation. With debt in excess of $20 trillion, and a debt/GDP ratio in excess of 100%, the U.S. has emerged as one of the major debtor countries in the OECD.
If the federal government had not abandoned the unwritten fiscal constitution of balanced budgets the debt could have been reduced, and perhaps eliminated over the past half century. Unfortunately the government has pursued Keynesian fiscal policies that are biased toward
The Swiss debt brake has enabled Switzerland to pursue a policy of fiscal consolidation to reduce deficits and achieve a sustainable fiscal policy. The Swiss debt brake imposes an expenditure limit that is cyclically adjusted based on the relationship between
What is the Optimum Combination of Fiscal Rules? Bovet, J. J. Fournier, and A. Mourougane. 2016. “A Reassessment of Fiscal Space in OECD Countries’, OECD Working Paper no. 1352, Nov 23. Carnot, N. (2014), “Evaluating Fiscal Policy: A Rule of
The success of new fiscal rules will depend upon their effectiveness in promoting economic stability and economic growth. There are several ways in which the proposed MP rule will promote these objectives, and the dynamic simulation model used in this
GUIDELINES FOR THE DESIGN OF NEW FISCAL RULES FOR THE U.S. In our book ‘Restoring America’s Fiscal Constitution’ (Merrifield and Poulson 2017) we make the case for a new set of fiscal rules to guide fiscal policy in the U.S.
Expenditure Rules Emerge as the Anchor of a Sound Public Financial Management System The period since 1990 has witnessed a sharp increase in the number of fiscal rules at both the national and supranational level. Fiscal rules of course are
The Debt Brake The proposed MP rule follows the Swiss precedent by imposing a brake on spending when debt approaches a debt tolerance level (Merrifield and Poulson 2016b, 2017). The debt tolerance level chosen in the European Union is 60%
Setting the Parameters for U.S. Fiscal Stabilization Policy What is the Rationale for New Fiscal Rules? Alesina and F. Giavazzi (eds.), Fiscal Policy after the Financial Crisis, NBER, The University of Chicago Press, Chicago. Persson, T., and G. Tabellini. 2000.