(Non)equivalence in a federalism: Dual tax shares, flypaper effects and Leviathan

Among the best-known theorems of fiscal federalism is the presumed allocative and distributive equivalence between a lump-sum grant to a collectivity and a set of lump sum grants to the members of a collectivity. Interestingly, the simple elegance of the theorem is at odds with observed behavior. Grants to governments produce greater public spending than does tax reduction. Explanations of this "flypaper effect" range from misspecified econometric modeling to presumed behavior based on fiscal illusion. In this paper we show that theoretical equivalence exists in a model that recognizes only one tax share, the citizen voter's local tax share. When the model is expanded to include voters' federal tax shares as well as local taxes, non-equivalence and the flypaper effect become the rule, not the exception.     

The Budget Enforcement Act in 1991: Isometric Budgeting

The immediate effect of the Budget Enforcement Act (BEA) of 1990 was to cancel a pending $110 billion sequester and to change the Gramm-Rudman-Hollings deficit targets. These and other changes allowed Congress and the administration to escape responsibility for increases in the deficit if discretionary spending was kept within the caps and no new entitlement programs or revenue enhancements were added. This assumption and others relating to the empowerment of the Appropriations Committees and the new authority of the OMB are explored in this article.     

Credit enhancement of municipal debt

Abstract: The municipal bond bank (mbb) innovation began in Canada in 1956 and in the United States in 1970. This paper concentrates on why mbbs exist, their characteristics, where they work best, and how they compare with other municipal debt credit enhancement techniques. It concludes with a discussion of the future role these organizations will have in providing long-term capital funding to municipalities in Canada and the United States. Sommaire: Le principe de la Banque d'obligations municipales (BOM) fut introduit en 1956, au Canada et, en 1970, aux États-Unis. Cet article explore la raison d'être des BOMS, leurs caractéristiques, leurs conditions de succés maximum et les compare à d'autres techniques pour rehausser le crédit de la dette municipale. L'article se termine par une discussion sur le rôle que ces organisations auront à l'avenir dam le financement capital à long terme des municipalités au Canada et aux États-Unis.     

Power,throne, and rank

Richard Hoggart has spent all his working life teaching English literature and involved in different ways with cultural studies. He is the author of the seminal book The Uses of Literacyand most recently of Townscape with Figures: Farnham—reviewed in this issue of SOCIETY.     

The measurability of budget related rent-seeking

It has been suggested that the extent of rent-seeking expenditures arising from attempts to influence budget allocations should be estimated by the absolute magnitude of the observed changes in allocation. Instead, we argue that it is the extent of theex ante prospective changes that determine the level of rent-seeking, and that in the presence of countervailing activity these may be quite unrelated to the ex post observed values. We further argue that the traditional rent-seeking model of competition for a pre-specified rent is inappropriate in this context.