No Simple Fix: Fiscal Rules and the Politics of Austerity

Fiscal rules were supposed to provide a simple remedy for out-ofcontrol government spending. They were predicated on a deep skepticism about the capacity of democratic systems to exercise fiscal self-control. After three decades of experimentation, it is evident that advocates of fiscal rules overestimated the capacity of legal instruments to impose discipline on democratic processes. Certainly, many advanced democracies have improved their fiscal performance-but fiscal rules have played a small role in this process.

Experience suggests that advocates of fiscal rules drew the wrong lessons from the experience of the 1970s, and underestimated the capacity of democratic systems to respond constructively to fiscal crises