Democracies and Deficits: Prospects for Fiscal Responsibility in Democratic Nations

The financial crisis had significant implications for the fiscal positions of OECD. As nations seek to cope with the economic contraction, budget deficits and debt have risen to near record postwar levels. As the crisis in Europe and other advanced economies has deepened, fiscal consolidation will have to be coupled, and even preceded, by actions to jump‐start crippled economies. Nonetheless, when fiscal consolidation becomes necessary, nations that procrastinate by waiting for a crisis to provide cover for the politically hard choices will pay a steep price indeed both economically and politically. Many in the academic and policy community have raised questions about whether advanced democracies have the political wherewithal to respond to gathering fiscal pressures through early and timely action. Recent fiscal actions in advanced nations suggest that democracies are not doomed to wait for market shocks and crises. Rather, leaders have shown that fiscal sacrifice can be achieved in ways that promote electability. In this article, we discuss the impetus for democratic fiscal actions and the strategies used to gain public support.