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Revista de la Facultad de Derecho

Print version ISSN 0797-8316On-line version ISSN 2301-0665

Abstract

BLANCO, Andrés. On the convenience of the fiscal rule: fiscal policy and democracy. Rev. Fac. Der. [online]. 2021, n.51, e201.  Epub Dec 01, 2021. ISSN 0797-8316.  https://doi.org/10.22187/rfd2021n51a7.

The discussion on the adoption of fiscal rules (understood as permanent limitations of the growth of public spending) in the Constitution, international treaties or even ordinary legislation, must be conducted on the basis of their economic effects. The limitation of the growth of public spending is a central proposal of the neoclassical theory in economics, which believes that such spending have distorting effects since individuals interpret it as future increases of public debt and taxes, and consequently retract their investment and consumption. Therefore, neoclassical authors affirm that cuts in public spending stimulate private consumption and investment. That belief is hardly contested from the Postkeynesian theory, which considers public spending as a part of demand that favours consumption and investment, and more specifically as the unique part of demand that can be a tool against recessions and unemployment. From that perspective, fiscal rules are not advisable at all, because they limit the possibility of adopting policies of struggle against recession and unemployment. Empirical evidences from countries with and without fiscal rules, as well as from Uruguay, suggest that such rules have not stimulated consumption and investment and, on the contrary, contributed to extend temporarily the adverse effects of recessions. On other hand, there are robust evidences of the independence of public debt respecting public spending and deficit, in opposition to the neoclassical thesis. In a political perspective, in turn, fiscal rules are contrary to the conception of deliberative democracy, since they exclude from the democratic decision and public debate a central issue of social life like the fiscal policy.

Keywords : fiscal rule; public spending; fiscal policy; public debt; fiscal deficit.

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