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Democracy in Deficit: The Political Legacy of Lord Keynes
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More important, however, is the authors' public-choice criticism of Keynesianism. The Keynesian doctrine of deficit spending provided the academic excuse for elected representatives to spend without taxing, thus removing the self-imposed discipline of balanced budgets that had existed prior to the adoption of Keynesian thinking (p. 4): "The legacy or heritage of Lord Keynes is the putative intellectual legitimacy provided to the natural and predictable political biases toward deficit spending, inflation, and the growth of government" (p. 26).
Keynesianism might perhaps work under a system of benevolent dictatorship, but not in a democratic setting with citizens who are both taxpayers and beneficiaries of public services, professional politicians, political parties and government bureaucracy (pp. 79-80). "Political decisions in the United States are made by elected politicians, who respond to the desires of voters and the ensconced bureaucracy. There is no center of power where an enlightened few can effectively isolate themselves from constituency pressures" (p. 98).
Elected public officials display a bias towards spending public funds on projects that yield tangible benefits to their constituents, and towards not encumbering them with a tax bill to pay for those projects.Read more ›
This book is one of the first and best arguments anywhere for a balanced budget amendment to the Constitution. I was not persuaded by it but even those opposed to the arguments here will profit from understanding them better. Buchanan received a Nobel prize for his work, which has been quite influential. The argument here is made concisely in crisp and lucid prose refreshingly free of unnecessary jargon.
Buchanan and Wagner maintain that Keynes intellectually undermined what they think of as the effective "fiscal constitution" that had previously existed in the United States. This they describe as having been a broad bipartisan commitment to pay down, during normal times, any federal debt accumulated during wars and depressions. The authors acknowledge that Keynes himself never condoned budget deficits during healthy economic times. They even concede that Keynesian economics might work under a "truly benevolent despotism." Under democracy however, they insist that Keynes legacy has been the main reason we have had a seemingly permanent bias in public policy towards inflation and bigger government.
The main problem with this volume, and this argument, is not what it contains but what it leaves out. Public debt is discussed in nominal terms rather than the more relevant statistic which would be percent of GDP.Read more ›