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Chipping Away at Public Debt
Sources of Failure and Keys to Success in Fiscal Adjustment
Paolo Mauro (Author)
9781118043387, Wiley
Hardback, published 19 August 2011
304 pages
23.6 x 16 x 2.5 cm, 0.499 kg
"This analytical cross-country study of fiscal adjustment will be highly relevant for several countries, especially those in the euro area that, in the context of the new European governance, will follow a path of public debt reduction in the years ahead." "Unfortunately, out of necessity, the issues of debt and deficit dominate the national debate in too many countries. The experience of others can often provide a guide to solutions—what to do and what not to do. In this context, this book will prove invaluable." "Budget consolidation may well be the defining macroeconomic issue for the industrialized world over the next decade. The budget debate is as unbalanced as the budget. Ideology and rhetoric dominate in places where evidence and logic should dominate. This important book balances the debate by providing careful and analytic evidence on all the important tradeoffs. It is a must-read for everyone concerned about our fiscal future." "Reducing public debt will be the main policy issue for the next decade. This volume greatly helps us understand how to do it in a way that achieves the intended objectives despite unexpected events that will inevitably occur. We don't know as much as we should about fiscal policy: this volume improves our understanding with a careful analysis of many international examples of fiscal adjustment. A great read." "How should countries around the world deal with their burgeoning levels of national debt? This timely book's detailed case studies illustrate that though failure is common, there is also more than one path to success and a number of key principles that can serve as a guide to navigation." "There are few questions more important in the U.S. and Europe today than how public debt will be brought under control. Chipping Away at Public Debt reviews a wealth of experience with large-scale fiscal adjustment plans in advanced economies, drawing on country studies as well as statistical analysis. The authors reach useful and sometimes unexpected conclusions. In particular, economic factors such as 'growth surprises' are perhaps even more important than political factors in determining success."
—Carlo Azeglio Ciampi, Emeritus President of the Italian Republic (President, 1999–2006; Finance Minister, 1996–1999)
—The Right Honorable Paul Martin, former Finance Minister (1993–2002) and Prime Minister (2003–2006) of Canada
—Lawrence H. Summers, University Professor at Harvard University; former Director, National Economic Council (2009–2011); Secretary of the U.S. Treasury (1999–2001)
—Alberto Alesina, Professor of Political Economy, Harvard University
—Alan J. Auerbach, Professor of Economics and Law, Director of the Burch Center for Tax Policy and Public Finance, University of California, Berkeley
—Dani Rodrik, Professor of International Political Economy, John F. Kennedy School of Government, Harvard University
Path-breaking research on one of the most important macroeconomic policy challenges in the post-crisis world, presented in accessible language Written and researched by a team of experts from the International Monetary Fund, other policy-making institutions, and academia, this timely book looks at fiscal adjustment plans in advanced economies, comparing the planned or projected reductions in debts and deficits to the actual outcomes, and explaining why objectives were met in some cases but missed in others. An overview reveals pitfalls to avoid and lessons learned for securing successful fiscal adjustment. Educating and informing investors, economists, and the general public, this important book looks at why some attempts to curb debts and deficits succeed whereas others fail, as well as how to ensure successful fiscal adjustment in the period ahead.
Foreword ix Acknowledgments xi Introduction xiii CHAPTER 1 Canada: A Success Story 1 Introduction 1 Background 2 Plans versus Outcomes: Macroeconomic Factors 7 Nature and Composition of Adjustment 13 Structural Reforms 21 Extent to which Adjustments Were Sustained 23 Conclusion 25 Notes 27 CHAPTER 2 United States: The Quest for Fiscal Discipline 31 Introduction 31 First Attempt: Balanced Budget and Emergency Deficit Control Act 1985 33 Second Attempt: Omnibus Budget Reconciliation Act of 1990 36 Third Attempt: Omnibus Budget Reconciliation Act of 1993 38 Actual versus Projected Fiscal Performance under Omnibus Budget Reconciliation Act of 1993 42 1990s Deficit Reduction: Good Policy or Good Luck? 44 Easy Won, Easy Lost? 50 Conclusion 52 Notes 54 CHAPTER 3 France: Virtue and Fortune 57 Introduction: Factors Underlying the Need for Fiscal Consolidation 57 Early Attempts at Fiscal Adjustment 61 A First Attempt at Medium-Term Fiscal Consolidation, 1994–97 64 A More Systematic Approach to Medium-Term Budgeting: Consolidation Experiences under the Stability and Growth Pact 72 Conclusion 81 Notes 82 CHAPTER 4 Germany: Fiscal Adjustment Attempts With and Without Reforms 85 Introduction 85 1975–79 Consolidation Attempt 88 1981–85 Consolidation Attempt 93 1991–95 Consolidation Attempt 99 2003–07 Consolidation Attempt 105 Lessons 110 Notes 112 CHAPTER 5 United Kingdom: Four Chancellors Facing Challenges 115 Introduction 115 Selection of Consolidation Plans 116 Background, Content, and Performance of the Four Adjustment Plans 117 Determinants of Success and Failure 125 Lessons from Success and Failure 138 Appendix 5A. United Kingdom: Fiscal Adjustment Plans and Outturns 140 Notes 150 CHAPTER 6 Italy: Medium-Term Fiscal Planning under Frequent Government Changes 153 Introduction 153 A Brief History of Italy’s Fiscal Planning Framework 155 Short-Term Origins of Medium-Term Failures 157 A Narrative of Design and Performance of Pre- and Post-European Monetary Unit Plans 162 Implementing Plans for the Year Ahead 165 Two Important Plans Analyzed in Detail 167 Conclusion 172 Notes 174 CHAPTER 7 Japan: Fiscal Adjustment Plans and Macroeconomic Shocks 177 Introduction 177 The 1997 Fiscal Structural Reform Act 178 Medium-Term Fiscal Adjustment Plans: Fiscal Year 2002 and the Following 189 Conclusion 203 Appendix 7A: The Bohn Fiscal Sustainability Test 206 Appendix 7B: Timeline of Medium-Term Fiscal Adjustment Plans in Japan 209 Notes 209 CHAPTER 8 The Performance of Large Fiscal Adjustment Plans in the European Union: A Cross-Country Statistical Analysis 213 Introduction 213 Data, Sample Selection, and Methodology 216 Descriptive Analysis 219 Regression Analysis 232 Conclusion 241 Appendix 8A: Data Issues and Cyclical Adjustment 243 Appendix 8B: Timeline for European Monetary Integration (1990–2009) 245 Notes 246 CHAPTER 9 Conclusion 249 Key Findings: What Failed and What Worked in Past Attempts at Fiscal Adjustment 251 Implications for Planned Adjustments 255 Notes 258 References 259 About the Project Team 267 Index 271
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Subject Areas: Economics [KC]
