Abstract

http://ssrn.com/abstract=2151734
 
 

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The Politics of Fiscal Austerity: Implications for the United States


Paul L. Posner


George Mason University

Matthew K. Sommerfeld


George Mason University

Fall 2012

Public Budgeting & Finance, Vol. 32, Issue 3, pp. 32-52, 2012

Abstract:     
As austerity becomes the new normal for advanced nations, questions are raised about whether nations can make the hard choices necessary to bring about a sustainable fiscal future. The political defeat experienced by so many European governments undertaking fiscal consolidations points to the vulnerabilities that leaders will face. This article shows that how some Organization of Economic Cooperation and Development (OECD) nations have survived the daunting politics of fiscal consolidation by timing actions for periods of economic recovery and political honeymoons following elections and by pursuing deficit reduction strategies that emphasize broad sweeping changes yielding high potential for dramatic economic gains over the longer term. Unlike many European nations today, the seemingly endless appetite for US treasuries by worldwide markets give the United States the luxury of choosing to begin deficit reduction only when the economy strengthens. However, the absence of market pressure also reduces the sense of urgency, consigning national leaders to create internal crises such as the 2012 “fiscal cliff” to force their own hand. While the polarized politics characterizing our party system does not bode well for concerted fiscal action, divided government carries the potential for spreading political risks and promoting more sustainable fiscal outcomes, as it has in our recent history and in other nations as well.

Number of Pages in PDF File: 21

Accepted Paper Series


Date posted: September 25, 2012  

Suggested Citation

Posner, Paul L. and Sommerfeld, Matthew K., The Politics of Fiscal Austerity: Implications for the United States (Fall 2012). Public Budgeting & Finance, Vol. 32, Issue 3, pp. 32-52, 2012. Available at SSRN: http://ssrn.com/abstract=2151734 or http://dx.doi.org/10.1111/j.1540-5850.2012.01020.x

Contact Information

Paul L. Posner (Contact Author)
George Mason University ( email )
4400 University Drive
Fairfax, VA 22030
United States
Matthew K. Sommerfeld
George Mason University ( email )
4400 University Drive
Fairfax, VA 22030
United States
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