This paper is the penultimate draft of the fifth of six chapters of a book titled Public Debt: An Illusion of Democratic Political Economy. This paper modifies the benchmark condition of a cooperative democracy to incorporate a realistic treatment of democracy where there exist islands of...

The debate over legal requirements of a balanced federal budget has gained new life. A requirement would have strong implications for future fiscal policy. Done right, a requirement will allow Congress to combine a balanced budget with policy goals such as growth and full employment. Done wrong,...

Uncertainty about the future preferences of the government may induce policy makers to run excessive budget deficits. As a solution to this problem, economists have proposed to impose a binding debt rule. In this paper we argue that a binding debt rule does not eliminate the distortions due to...

This paper proposes a dynamic politico-economic theory of debt, government finance and expenditure. Agents have preferences over a private and a government-provided public good, financed through labor taxation. Subsequent generations of voters choose taxation, government expenditure and debt...

This is the second of a six chapters of the penultimate draft of a book titled Public Debt: An Illusion of Democratic Political Economy. This essay explores just who it is that supplies the macro guidance that is envisioned in the various macro theories. The answer to this question is of great...

This paper explores the macroeconomics of fiscal austerity and deflation in an economy with public debt. A binding budget deficit cap destabilizes the economy by turning the government budget into an automatic destabilizer. Public debt helps maintain AD in the presence of deflation because...