The Congress and fiscal policy

Although the common belief is that the Congress has paid little attention to fiscal policy, the same kinds of political-economic models which have been used to explain presidential budgetary policy may be used equally well to explain congressional budgetary behavior. The Congress' fiscal policy appears to be systematically sensitive to both economic and political factors. Changes in the unemployment rate have a major impact on congressional budgetary policy. As for political factors, the President's lead is followed most closely on revenue proposals and not at all on the expenditure side. The electoral cycle, in particular the off-year congressional election year, is also important; inducing larger deficits and smaller increases in revenues. When the influences on congressional fiscal behavior are compared with those on presidential behavior, the sources of the generally more expansionary congressional fiscal policy are identified. Congressional budget deficits increase in response to increased rates of unemployment but are insensitive to increases in inflation. In contrast, presidential budgets are heavily influenced by inflation and the growth in personal income — increases in each resulting in smaller proposed deficits — as well as by unemployment rates. In years in which both unemployment and inflation are increasing, the combination of the two (assuming a one percentage point change in each) implies an increase in the congressional deficit of $6.7 billion but a decrease in the president's proposed deficit of $2.5 billion. The implications of this study are a challenge to the literature which makes the President the central actor in macro-economic policy.     

Cabinet structure and fiscal policy outcomes

A central explanation of fiscal performance focuses on the structure of the cabinet. However, the partisan context of cabinet decisions remains under‐explored, the findings are based on small samples and the variables of interest are often poorly operationalised. Using a new dataset of spending ministers and partisan fragmentation in the cabinets of 58 countries between 1975 and 1998, this study finds a strong positive association between the number of spending ministers and budget deficits and expenditures, as well as weaker evidence that these effects increase with partisan fragmentation.     

The administrative state and fiscal policy: A comparative analysis of political issues in China and the United States

This article examines the budgetary politics in China and the United States. It illustrates the inherent political nature of fiscal policies produced by different political and economic systems. Although both countries are concerned with the distributive effects of reform, the study indicates that the central government of China confronts issues related to the distribution of power between the center and the provinces during economic transformation. In contrast, the debate in the United States is produced by the distribution of costs and benefits brought about by federal fiscal policy. The context of the debate is influenced, in part, by the administrative state.     

Political and institutional determinants of fiscal policy in the European Community

In recent theoretical and empirical research the variation in political and institutional arrangements which may affect the process of national policy formation is examined, in order to explain cross-country differences with respect to fiscal policies pursued. In this paper we build upon this literature and examine whether and how cross-country differences in debt accumulation and public sector size of Member Countries of the European Community during the 1980s can be explained. We conclude that the growth of government debt is positively related to the frequency of government changes and negatively to sound budgetary procedures. In countries with left-wing governments the growth of the share of government spending in total output generally tends to be higher.     

Fiscal institutions, fiscal policy and sovereign risk premia in EMU

We investigate the effect of fiscal institutions such as the strength of the finance minister in the budget process and deficits on interest rate spreads of Eurozone countries. Deficits significantly increase risk premia measured by relative swap spreads. The effect of deficits is significantly lower under EMU. This effect partly results from neglecting the role of fiscal institutions. After controlling for institutional changes, fiscal policy remains a significant determinant of risk premia in EMU. Better institutions are connected with lower risk premia. Furthermore deficits matter less for risk premia in countries with better institutions. Markets acknowledge that better institutions reduce fiscal difficulties rendering the monitoring of annual developments less important.     

The influence of federalism on fiscal policy making

Abstract. This article attempts to refine the statement that federal states face difficulties in fiscal policy making because of the territorial division of powers by comparing two federal countries, Canada and Germany. These two countries differ in terms of their type of federalism: Canada displaying a power-separation system and Germany corresponding to a power-sharing type. According to the authors, the territorial factor influences fiscal policy making through the distribution of taxing and spending powers as well as through patterns of intergovernmental relations. The use of fiscal policy instruments and the likely effects on conflict and cooperation in those two countries is discussed with empirical evidence. The authors come to the conclusion that federalism is indeed a constraint on fiscal policy making, but that the two types of power division face different obstacles and deal differently with fiscal problems. In the power-separation system of Canada, the federal government has encompassing competencies to use fiscal policy instruments unilaterally and without restraint, but faces a lack of concerted action with the provinces which reduces its scope of action in fiscal policy making. In the power-sharing system in Germany, concerted action facilitates macroeconomic stabilisation strategies but the compulsory negotiation system distorts the use of fiscal policy instruments by distributive bargaining.     

The growth effects of fiscal policy in Greece 1960–2000

This empirical paper uses annual data for Greece 1960–2000 to study the link between fiscal policy and economic growth. Our regression analysis implies that, although a smaller public sector can be good for growth, it is necessary to look beyond size; the composition and quality/efficiency of the public sector are equally important. The policy lesson is that a smaller government share in GDP, a reallocation of funds away from the wage bill to public investment, and an improvement in government quality/efficiency can become engines of long-term growth.     

长三角区域地方政府财政政策及其绩效评价

财政政策作为地方政府可以掌控的最直接、最有效的政策手段,其政策设计和实施效果对于实现地方社会经济发展目标有着不可替代的重要作用。就长三角地区地方政府公共财政政策的内容及其实施绩效进行初步的梳理和分析,从财政支出的角度对长三角地区部分公共财政政策的实施进行绩效评价。限于篇幅和容量,将只考察部分省级财政政策及其绩效评价,而对于长三角地区的省级政府以下的市、县、乡(镇)财政政策及其绩效没有考虑。     

Formula budgeting: The economics and analytics of fiscal policy under rules

The dramatic change in aggregate fiscal policy in recent years has contributed to a shift from process rules to allocation rules in federal budgeting. Although the allocation rules inherent in formula budgeting seem to offer fairness in times of fiscal constraint, they actually impose arbitrary program-level budgets that reflect the peculiarities of baselines, accounting conventions, and time horizons. Formula budgeting also changes the analytical environment, forcing policy analysts to pay greater attention to institutional arrangements.     

Research and Social Security policy in the United States

This article is adapted from a paper presented at a conference that investigated the role of policy research in shaping public policy. The conference focused on how studies of economic and social forces and their relationship with public problems and programs affect the decisions of public policymakers. The author contends that research has the potential to inform policy-making in any of its five stages: problem identification, option development, passage of new laws or development of new procedures, implementation, and evaluation. She notes that different players in the policy-making process use research differently, from the senior government official who needs a quick review of what is known relating to a "hot" issue to the interest group lobbyist who wants access to raw data. The article concludes that research can best achieve its potential when (1) it anticipates policymakers' information needs, (2) it is disseminated in an accessible form understandable to nonresearchers, and (3) the policy analyst is willing to engage in the policy process as an advocate for efficiency.