Do Markets Work Better than Legal Restraints? A Response to Clayton Gillette's 'Fiscal Home Rule'

This essay responds to Professor Clayton Gillette’s “Fiscal Home Rule,” in which he argues that markets are more likely to ensure local fiscal discipline than constitutional restraints on municipal taxing and borrowing authority. This essay expands on Professor Gillette’s analysis by exploring “soft” legal restraints on municipal fiscal authority – that is, limits on taxation and borrowing that can be circumvented by popular vote. Although these soft limits seemingly preserve more flexibility for localities by allowing for the expression of voter preferences, they have proved surprisingly sticky in limiting fiscal authority. This essay suggests that the reason for this stickiness is that soft limits re-frame voters’ perceptions of the appropriate levels of municipal taxation and indebtedness