Corruption and State and Local Government Debt Expansion

Theories describing rent seeking in the public sector posit a number of negative fiscal outcomes that the choices of corrupt officials may generate. The evidence presented in this article shows that states with greater intensities of public corruption have higher aggregate levels of state and local debt. If corruption in the 10 most corrupt states were only at an average level, their public debt would be 9 percent lower, or about $249.35 per capita, all else being equal. Notably, institutional control measures may not have succeeded in restraining the expansion of state and local public debt in the presence of greater levels of corruption. State and local governments would achieve more efficient levels of fiscal discipline by curbing public sector corruption.     

Do citizens care about government debt? Evidence from survey experiments on budgetary priorities

Ever since the Great Recession, public debt has become politicised. Some research suggests that citizens are fiscally conservative, while other research shows that they punish governments for implementing fiscal consolidation. This begs the question of whether and how much citizens care about debt. We argue that debt is not a priority for citizens because reducing it involves spending and tax trade-offs. Using a split-sample experiment and a conjoint experiment in four European countries, we show that fiscal consolidation at the cost of spending cuts or taxes hikes is less popular than commonly assumed. Revenue-based consolidation is especially unpopular, but expenditure-based consolidation is also contested. Moreover, the public has clear fiscal policy priorities: People do not favour lower debt and taxes, but they support higher progressive taxes to pay for more government spending. The article furthers our understanding of public opinion on fiscal policies and the likely political consequences of austerity.     

Excellence at What Cost? Austerity and the Reform of the School System in England (2010–2016)

The reform of the school system, which has been conducted by the Coalition and Conservative governments since 2010, has largely been austerity‐driven. In spite of the governments’ pledge to protect their budgets, schools have been severely hit by spending cuts. The reform programme has itself been integral to the fiscal consolidation plans by promoting a more cost‐effective system of state schooling. This article discusses the relationship between austerity and reform, and looks at the consequences for the concept of public service. Some specific aspects of the new institutional framework are examined, especially the creation of an independent state sector made up of academies and free schools, which has entrenched the involvement of private sector firms in education. The overhaul of the school system, which started nearly thirty years ago, has now reached a new decisive stage. However, considering the complex relationship between multiple actors and the opposing forces at work, one cannot say with any certainty that it will cause the demise of public service state education.     

Fiscal Consolidation and Australia's Public Debt

Australia has experienced one of the fastest growing public debt levels in the world post‐Global Financial Crisis due to a series of large federal budget deficits driven by high government spending. In this paper we examine the balance sheet implications of this escalating public debt, before proposing some macro‐fiscal objectives for determining its sustainable level. These objectives are to (i) restore the federal government's solvency; (ii) eliminate foreign public debt; and (iii) achieve budgetary balance over the business cycle. Empirically, we first examine how much fiscal consolidation is required for debt stabilisation at current levels, before considering what sized budget balances are needed to achieve the target debt to GDP ratios consistent with the proposed objectives. The results show that no target debt to GDP level consistent with the optimal levels will be met on current fiscal settings in the medium term. This implies significantly greater fiscal consolidation is required to minimise future fiscal risk.     

Demokratie als öffentliches Gut?

Political Science neglect classical insights on constitutional and economic conditions of the so called “tax state” as a fiscal institutional architecture sui generis. While studies in Political Economy focus on distribution quality of the welfare state or compare budgets from local to international level fiscal research should also consider the capitalist structure of tax paradigm again. Only after such a regeneration the discipline could better reflect old and new democratic challenges of fiscal problems. Recalling former theories of interdependencies between fiscal, constitutional and ideological orders, this article suggests to make sense of conceptualizing democratic regime itself as prime public good. Because if it is fiscal sovereignty that is foremost to produce with democracy’s budget it should be easier to analyze tax state driven regressive effects of democratic integrity.     

Serial payers,serial losers? The political economy of Argentina’s public debt

A global neoliberal architecture has enabled many countries to increase their public debts to meet their fiscal needs. But since 2008 a number of European and North American economies have faced financial crises induced by unsustainable debts. This paper analyses the case of post-default Argentina since 2001, so as to better comprehend the political economy of public debt, especially in cases where governments are elected on anti-austerity platforms. Presidents Néstor and Cristina Kirchner were committed to a debt-reduction policy, yet Argentina faced a new, ‘selective’, default in 2014. This paper analyses how the country has been trapped in a cycle of debt dependency, which can only be interrupted by a comprehensive audit of the debt’s legitimacy followed by debt cancellation. Critical lessons are provided for other countries facing similar situations.     

Municipal debt in Switzerland: new empirical results

Switzerland has experienced extensive institutional reforms at the local level that could influence local debt. These reforms have included municipal mergers, greater inter-communal cooperation, reformed political decision-making mechanisms, and the introduction of new public management measures. Many of these reforms originated at the cantonal level. However, the institutional diversity among Swiss municipalities hardly has diminished. A cross-sectional analysis for the 137 largest Swiss cities and villages in 2004 shows that direct democratic rights and a high degree of fiscal autonomy lead to a lower level of local debt. There is no statistical support for the hypothesis that reforms following the new public management guidelines had an effect on debt levels.     

Decentralization and Fiscal Discipline in Sub-national Governments: Evidence from the Swiss Federal System

This article analyses the relationship between decentralizationand the extent of fiscal discipline in the Swiss cantons between1984 and 2000. From a theoretical point of view, decentralizationand federalism can be associated with both an expansive anda dampening effect on government debt. On the one hand, decentralizedstructures have been argued to lead to a reduction of debt dueto inherent competition between the member states and the multitudeof veto positions which restrict public intervention. On theother hand, decentralization has been claimed to contributeto an increase of public debt as it involves expensive functionaland organizational duplications as well as cost-intensive, oftendebt-financed, compromise solutions between a large number ofactors that operate in an uncoordinated and contradictory way.Our empirical results show that in periods of prosperous economicdevelopment, the architecture of state structure has no impacton debt. However, the degree of decentralization influencesdebt in economically poor times: In phases of economic recession,administratively decentralized cantons implement a more economicalbudgetary policy than centralized Swiss member states.     

Capital appreciation bonds and the cost of borrowing

A Capital Appreciation Bond (CAB) is a financial instrument that is most attractive as a resource-flow management instrument. It bridges multiple fiscal years for jurisdictions experiencing rapid growth, potentially stretching for decades, but may also be used by localities experiencing fiscal distress. Using debt issuance data by independent school districts in Texas, who utilized almost all such bonds in the state, we present empirical evidence that CABs are associated with both the service and fiscal pressure factors. We further observe that, though the threat from CABs in terms of borrowing costs may have been exaggerated, enacting limits on debt repayment ratios (ratio of payment size at maturity to premium size) was likely the right legislative intervention.     

Clinton and volunteerism: The poverty of American social policy at the end of the century

Abstract

Volunteerism has resurfaced in late 20th century America as an alternative to comprehensive state social policies. The impression given is that voluntary involvement—“human contact”—is the answer to the vast social problems facing the millions of America's poor today and to the growing class inequalities and social polarization. The present article argues that the shift to volunteerism is prompted by fiscal constraints, the radical shift in the balance of power between capital and labor, and the conversion of the state into an instrument of overseas expansion for the interests of financial capital and the multinationals. Its authors advance the claim that the philosophy of volunteerism is a great deception—an ideology of the rich and powerful that aims to deny that social problems are structural and related to the capitalist system and thereby to disguise the exploitation of the poor and the inequality of classes.     

Is ‘good enough’ peacebuilding good enough? The potential and pitfalls of the local turn in peacebuilding in Timor-Leste

There is a palpable sense of humility within the United Nations and other international institutions regarding peacebuilding. Rather than seeking to implement the liberal peace, they now pursue the more modest goal of ‘good enough’ outcomes. This shift reflects a growing consensus in the critical literature that space needs to be provided for the local agency that will ultimately determine the outcomes of peacebuilding. At first blush this emphasis on local agency is positive; it offers an important correction to the technocratic and generally top-down nature of liberal peacebuilding. But, is the ‘good enough’ approach to peacebuilding good enough? What are the pitfalls and potential of the local turn? This article uses a case study of Timor-Leste to answer these questions. It finds that the local turn can help lend legitimacy to the state and increase opportunities for political participation and the delivery of public goods at the local level. However, the emerging evidence from Timor-Leste also highlights the pitfalls of the local turn. Most significantly, the state can transfer responsibility for public goods provision to the local level in order to lessen the burden on the state and to divert attention from ineffective or illegitimate central institutions.     

Unfunded Mandates and Fiscal Structure: Empirical Evidence from a Synthetic Control Model

An unfunded expenditure mandate occurs when governments are required to provide a good or service by a higher level of government without an accompanying revenue source. There are no empirical studies providing causal evidence on the fiscal influence of intergovernmental mandates. This article examines Florida's 1990 constitutional Amendment 3, which sought to limit unfunded state mandates on municipal and county governments. The synthetic control method, an empirical technique for drawing causal inferences from case studies, estimates the effect of Amendment 3 on state expenditures and total transfers to local governments. The results indicate that state expenditures increased by an annual average of 9.5 percent, while state transfers to all local governments were unaffected. However, the municipalities protected by Amendment 3 saw intergovernmental revenue from the state decrease by 10 percent annually, which suggests that remaining mandates likely targeted special districts, encouraging the fragmentation of local public service delivery.     

Austerity Policies,the UK State and the Energy Utilities: a Changing Paradigm or Business as Usual?

In 2008, the economic downturn coincided with a major shift in the energy sector paradigm. This state of emergency forced the UK government to try to steer the objectives of its major energy players. This crisis put the UK state's capacity to influence its mostly privately‐owned energy sector to the test. Using the example of energy utilities, this article aims to explore whether the austerity agenda impacted the relationship between the UK state and its public services. The purpose is to determine whether current multiple crises have forced the UK state to adopt an exceptionally interventionist approach that doesn't tally with the austerity agenda, or whether these crises merely revealed dynamics which had been underlying in the management of its energy utilities since the beginning of the neo‐liberal era.     

State and Local Fiscal Sustainability: The Challenges

At the state and local level, fiscal sustainability is the long‐run capability of a government to consistently meet its financial responsibilities. It reflects the adequacy of available revenues to ensure the continued provision of the service and capital levels that the public demands. After examining separate revenue and expenditure trends for state and local governments, this article identifies three specific sets of pressures that affect subnational fiscal sustainability—cyclical, structural, and intergovernmental. It then presents three specific examples of these pressures: Medicaid, pensions and retiree health benefits, and infrastructure. The author asserts that without changes in the fiscal system—in both revenues and expenditures—state and local fiscal sustainability will disappear. It concludes with some potential solutions but argues that the most difficult reform is to ensure that the public understands that there is no such thing as a free lunch.     

On the Determinants of Local Government Debt: Does One Size Fit All?

ABSTRACT

This article analyzes the factors that directly influence levels of debt in Spanish local governments. Specifically, the main objective is to find out the extent to which indebtedness is originated by controllable factors that public managers can influence, or whether it hinges on other variables beyond managers’ control. The importance of this issue has intensified since the start of the crisis in 2008, due to the abrupt decline of revenues and, simultaneously, to the fact that the levels of costs these institutions face has remained the same or, in some cases, increased. Results can be explored from multiple perspectives, given that the set of explanatory factors is also multiple. However, the most interesting finding is the varying effect of each covariate depending on a municipality's specific debt level, which suggests that economic policy recommendations should not be homogeneous across local governments.     

Public Services after Austerity: Zombies,Suez or Collaboration?

Public services—in the UK and elsewhere—are under considerable pressure, not just from austerity, but also from a variety of social, demographic and technological changes (in effect ‘austerity plus’). In this context, three broad options are open to policy‐makers: continue with tried‐and‐tested approaches while spending less money, which in the UK means a reliance on ‘New Public Management’ (NPM); withdraw completely from certain public services; or develop new approaches to public administration. We argue that all of these approaches have been attempted in recent years, but it is the final option that is most interesting and potentially the most beneficial. In this article, we examine experiments with these new approaches in responding to ‘austerity plus’. In particular, we examine various attempts at ‘collaboration’ in public services and discuss the risks associated with them. We conclude by setting out the extent to which policy‐makers have moved beyond NPM and suggesting some of the benefits that this could bring.     

Decentralization and Development in Contemporary Uganda

Abstract

There has long been an emphasis on the importance of decentralization in providing better quality public services in the developing world. In order to assess the effectiveness of decentralization I examine here the case study of Uganda, which has seen major decentralization of power over the last quarter-century. In particular the current government has introduced a five-tiered local government structure, decentralized both fiscal and political power to local governments and introduced regular local government elections. However, initial excitement about Uganda's decentralization programme has tapered off in recent years due to a number of problems outlined here. In particular, I show that decentralization in Uganda has suffered from a lack of independence from central government control, which has led to a lack of effectiveness in the provision of high quality public goods.     

Does fiscal pressure constrain policy responsiveness? Evidence from Germany

Political responsiveness is highly unequal along class lines, which has triggered a lively debate about potential causes of this political inequality. What has remained largely unexplored in this debate are the structural economic conditions under which policymakers operate. In this contribution, we hypothesize that budgetary pressures affect both the level and the equality of political responsiveness. Using a dataset containing public opinion data on around 450 fiscal policy proposals in Germany between 1980 and 2016, we investigate whether policymakers are more responsive on issues with budgetary consequences under conditions of low fiscal pressure than under conditions of high fiscal pressure. We find that responsiveness indeed varies systematically with the degree of fiscal pressure and that policymakers are less responsive on fiscal issues when fiscal pressure is high. This holds for both left-wing and right-wing governments. In contrast, we do not find strong effects of fiscal pressure on political inequality: responsiveness is not more equal in fiscally more permissive times. However, since different types of policy proposals are adopted in times of high fiscal stress, unequal responsiveness has different policy implications in times of high and low fiscal pressure.     

The Local Legitimacy of Peacekeepers

ABSTRACT

Recent scholarship and policy doctrine alike have identified local legitimacy as an important ‘success factor’ in peacekeeping – but like many such calls for greater attention to local dynamics, it is often unclear what local legitimacy actually means, how to analyse it, what causal processes are at work, and what might obstruct the operationalization of well-intentioned policy recommendations for peacekeepers to seek local legitimacy. This article aims to bring clarity to the complex concept of local legitimacy, including the ways in which insights drawn from legitimacy theory developed in very different social contexts can be adapted to the realities of the conflict societies into which peacekeepers deploy. First, it examines what it means to locate the legitimacy of peace operations at the local level, rather than the international. Second, it clarifies the causal links between peacekeepers’ legitimacy and their effectiveness, reviewing scholarship on local legitimacy and its adaptation of broader legitimacy theory. Third, it identifies three important reasons that locally legitimizing peacekeepers is so difficult in practice, distinguishing between the difficulties derived from the particular features of conflict societies and those derived from the institutional characteristics of peace operations.     

The Impact of Fiscal Illusion on Housing Values: An Australian Test of the Debt Illusion Hypothesis

The debt illusion hypothesis holds that taxpayers may underestimate the present discounted value of future tax liabilities under debt finance. The empirical question arises as to whether debt illusion at the local government level can affect housing values. This proposition is evaluated by investigating whether local fiscal variables are fully capitalized into housing values by means of a pooled time-series, cross-sectional analysis of twenty-seven metropolitan municipalities in Sydney, Australia, for the period 1989 to 1991. The results indicate that municipal debt is under-capitalized into housing values and, accordingly, suggests that local government expenditure may be systematically biased upwards.