James Buchanan won the Nobel Prize for economics in 1986. Buchanan became a leader in what is known as the “economics of public choice,” a field melding economics with political science.
In a 2007 article in the Independent Review, Jerry Tempelman reviewed seven main themes of Buchanan’s work relating to government deficits and debt. Those themes were:
- The incidence of public debt
- Economic consequences of public debt
- Ricardian equivalence
- Keynesian macroeconomics
- Permanence of public debt
- Moral consequences of public debt
- The need for a constitutional balanced budget amendment
Summarizing briefly (and more to follow), Buchanan started with a public choice economist’s main assumptions, which include a realization that government officials are primarily self-interested, like the rest of us. As a result, they tend to prefer debt financing to taxes, which couples with spending preferences to lead to an unhealthy accumulation of debt over time. The ‘incidence’ of public debt deals with who pays the freight, who bears it, and Buchanan argued that future generations bear those costs.
The accumulation of debt borne by people without a say in the matter is immoral, in Buchanan’s view, yet this will be a natural outcome of a government process without strong moral leadership and/or legal constraints. Strong moral leadership is a rare thing, and Buchanan called for legal means like a constitutional balanced budget requirement to bind the hands that lead us.
There are calls out there today for a new Article V convention to develop an amendment to the U.S. Constitution calling for a balanced budget. If we’ve learned anything from state experience, however, the effectiveness of any such constraint depends on how it is worded, and enforced.