Swedish and Swiss Fiscal-Rule Outcomes Contain Key Lessons for the United States

摘要

The experience with new fiscal rules in OECD countries suggests that it may take a fiscal crisis in the United States to create a consensus in favor of rules that require fiscal consolidation. The current circumstances probably qualify, but so far there has been no movement toward the adoption of such rules, and it may take a government proclamation to make it official. The U.S. budgeting rules, which are not true fiscal rules, have not constrained growth in federal spending. The spending-cap provisions of the Budget Control Act of 2011 failed to force congressional agreement on a leaner budget. That lack of agreement triggered sequestration provisions that mandate cuts in discretionary spending that neither political party prefers. The recent budget agreement for 2016 adopted the spending caps in the Budget Control Act. But that agreement allows Congress to shift to off-budget spending and exempts certain programs from the spending caps (Boccia 2015; Moore and Griffith 2015). The agreement instructs Congress to address the problem of entidement, but it does not provide any specific recommendations for entidement reform. The expectation is that Congress will continue to lift the spending caps and suspend sequestration to avoid spending cuts. The experience with fiscal rules in Congress suggests that the rules have had at best a temporary impact on fiscal policy and that the ideological divide over fiscal policy has actually widened in recent years. The outcome of this gridlock is likely to be unconstrained growth in federal spending as well as increasing deficits and debt in the long run. The United States is now in much the same position that Switzerland and Sweden were in two decades ago. A financial crisis has resulted in deficit and debt levels far in excess of tolerance levels. The United States has no existing fiscal rules capable of imposing the fiscal discipline required for a sustainable fiscal policy. Going Swiss with a U.S. version of the SDB would likely deliver some much-needed consolidation, but the prospects for enacting stringent new fiscal rules are not promising. Stringent new fiscal rules have been proposed in Congress as both statutory and constitutional measures, but these measures have made little headway. Given the reluctance of Congress to enforce the weak and ineffective budget rules now in place, it is unrealistic to expect legislators to adopt the stronger Swiss-style fiscal rules without additional pressure from much more assertive leadership or from a financial crisis that could arise just from the effect of higher interest rates on debt-service costs. Naturally, we hope the former can avert the latter. There is a precedent for incorporating stringent fiscal rules in state constitutions (Merrifield and Poulson 2014). Some states, such as Colorado, have enacted tax and expenditure limits as constitutional measures. Colorado's Taxpayer Bill of Rights (TABOR) Amendment imposes a stringent spending limit on both the state and local governments. Like the SDB, the TABOR Amendment was enacted as a constitutional referendum by a majority of Colorado citizens. Despite special interests' efforts to circumvent, weaken, and rescind TABOR, it continues to effectively constrain government spending in Colorado. Like Switzerland, Colorado is outperforming other states in economic growth (Merrifield and Poulson 2014). Unfortunately, the positive experience with tax and expenditure limits enacted in Colorado and other states has not led to similar reform at the federal level. The United States has not followed the precedent set in Switzerland, where debt brakes at the cantonal level were followed by the constitutional debt brake at the federal level. Swiss citizens benefit from a vigorous direct democracy and federalist system that no longer exists in the United States. Swiss citizens exercise a great deal of direct control over fiscal policy at both the cantonal level and the federal level. Direct control over fiscal policy by U.S. citizens is limited to their state and local governments. Rapid growth in the federal government has been accompanied by deterioration in the federalist system. The federal government increasingly encroaches on powers that were once widely recognized as reserved to the states and citizens by the Tenth Amendment. The U.S. Constitution does not provide for direct democracy in the form of referendum, whereas the Swiss Constitution includes referendum provisions. However, Article V of the Constitution does allow states to petition for an amendment convention. Twenty-seven states have passed resolutions calling for a balanced-budget amendment convention (BBA Task Force 2015). These resolutions have language that could provide for a cyclically balanced budget similar to the Swiss debt brake. The success of such resolutions may appear to be a long shot, but in fact there is a precedent for this approach to amending the Constitution. When it appeared that the requisite two-thirds of the state legislatures would approve resolutions calling for an amendment convention to propose the Seventeenth Amendment (establishing the election of U.S. senators by the people of the states), Congress responded with legislation to propose the amendment in order to preempt the states from holding a convention. One can envision a similar outcome for a balanced-budget amendment, wherein Congress proposes such an amendment to preempt the states from proposing it through an Article V amendment convention. If Congress were to fail to propose the amendment, U.S. citizens might decide that it is time for them to exercise the rights granted to them in Article V. When citizens of Colorado and other states made the choice to decide how much government they want and are willing to pay for, they supported constitutional rules to constrain government spending. Ultra-rational behavior regarding fiscal rules is not unique to citizens in the Rocky Mountains and Swiss Alps. It is time to give all U.S. citizens this choice.