The restoration of fiscal stability: A public choice approach on the problem of public debt

Abstract

In contemporary democracy fiscal policy is not employed for the fiscal control of necessary state activities but for generation of deficits which cause the state to feed on itself and expand enormously in the service of special interests and contrary to the public’s interest in fiscal stability and discipline. Starting from the origin of and the reason for, the classical liberal state, an analysis of the historical theoretical background of public choice is done. The development and application of public choice analysis can work towards restoring fiscal stability, especially after the outbreak of the global financial crisis that generated the enormous increase in the public deficit and debt in the developed democracies. Institutions in this case play a decisive role in ensuring that its manner of drafting and the high principles of its elaboration place effective limitation on the state not allowing the constitution to be used as a legislative point of departure for the further expansion of the state and the exaburation of its public deficit and debt.