International Encyclopedia of Public Policy and Administration - Vol. 2

By Jay M. Shafritz | Go to book overview

Lessons learned from deficit reduction from both Sweden and Canada in the mid-1990s would seem to indicate that deficits and debt as a percentage of GDP can be brought under control, but that success rests on making sure that all see that the pain is being shared equitably; that the program is comprehensive rather than a series of ad hoc measures so that interest groups see that all are sacrificing; and that the reform process and budgeting procedures be as transparent as possible to ensure that credibility is established and kept with the public and with capital markets and those who buy the country's debt instruments. ( Person 1995, pp. 413-418; Martin 1995, pp. 203-227).

Without program change, further fiscal stress is assured; for example, for the United States the net liability of public pension plans (Social Security et al.) amounted to 31 percent of 1994 GDP in present value terms, subtracting the value of future Social Security taxes and present surpluses from the future payment liability. This leaves a pension liability amount equal to 31 percent of the 1994 GDP that will have to be met, either with increased taxes or decreased programs ( Masson and Mussa 1995, p. 31). This is a long-term problem because the public has expectations that these commitments will be met, and changing those expectations while presenting alternative plans that people will have time to shift into will take time and persistent policy care. If that does not happen, the debt burden will continue to increase and the lives of citizens now and in the future will be slowly impoverished as productivity decreases, tax burdens increase, and the quality of life decreases. Moreover, without change, current intergenerational inequities will continue as present retirees receive significant net benefits while current and future workers make large net payments. This profile is probably not sustainable and without policy change, those who contribute a lot in the present risk getting back a little in the future. While political delay in fixing this painful problem is often expedient, the longer the delay, the more difficult it will be to design, get agreement on, and implement a solution.

JERRY MCCAFFERY


BIBLIOGRAPHY

Ball, Laurence and N. Gregory Mankiw, 1995. "What Do Budget Deficits Do?" In Budget Deficits and Debt: Issues and Options, Stuart Weiner, ed. Proceedings of symposium sponsored by the Federal Reserve Bank of Kansas City (September), pp. 95-120.

Budget of the U.S. Government, FY 1997. Washington, D.C.: U.S. Government Printing Office.

Federal Borrowing and Debt, 1996. In Analytical Perspectives: Budget of the U.S. Government, Fiscal Year 1997 Washington, D.C.: U.S. Government Printing Office.

Feldstein, Martin, 1995. "Information on Crowding Out". In Budget Deficits and Debt: Issues and Options, Stuart Weiner, ed. Proceedings of symposium sponsored by the Federal Reserve Bank of Kansas City (September), pp. 403-412.

Martin, Paul, 1995. "Information on Canada". In Budget Deficits and Debt: Issues and Options. Proceedings of symposium sponsored by the Federal Reserve Bank of Kansas City (September), pp. 203-227.

Masson, Paul and Michael Mussa, 1995. "Long-term Tendencies in Budget Deficits and Debt". In Budget Deficits and Debt: Issues and Options, Stuart Weiner, ed. Proceedings of symposium sponsored by the Federal Reserve Bank of Kansas City (September), pp. 5-56.

Person, Goran, 1995. "Information on Sweden". In Budget Deficits and Debt: Issues and Options, Stuart Weiner, ed. Proceedings of symposium sponsored by the Federal Reserve Bank of Kansas City (September), pp. 413-418.

Shigehara, Kumbiharu, 1995. "Commentary". In Budget Deficits and Debt: Issues and Options, Stuart Weiner, ed. Proceedings of symposium sponsored by the Federal Reserve Bank of Kansas City (September), pp. 55-88.

Weiner, Stuart, 1995. Budget Deficits and Debt: Issues and Options. Proceedings of symposium sponsored by the Federal Reserve Bank of Kansas City (September), pp. 57-88.

DECENTRALIZATION. A shift of power from a center whose jurisdiction is relatively large to a center or set of centers of smaller jurisdiction.

The term, like its antonym, centralization, was first used in the first half of the nineteenth century, no doubt as a response to the emergence of the modern nation state. In the century that followed, the bulk of relevant writings was concerned with local governments and their relations with national governments. It was during this period that the convention emerged that defined the size of a center primarily in terms of the numbers of people under its jurisdiction. More recently, the scope of discussion has widened, with the transformations of state systems that have accompanied the passing of major empires. There has, however, been a paucity of theoretical work on processes of decentralization: in the English language, B. C. Smith ( 1985) has produced the sole substantial and widely read book-length treatment.

Although terminologies have inevitably varied, most writers distinguish two main forms of decentralization: (largely political) devolution and (largely administrative) deconcentration. Political devolution inevitably is expressed in statutory terms, which are often entrenched constitutionally, as in federal systems. However, those federations which were brought into existence by a centralizing agreement between previously independent entities-the majority -- are most accurately described as being noncentralized. The principal subnational governmental entities -- provinces-enjoy constitutional protections from at least some of the arbitrary policyrnaking of the national government, and, because they are so protected, they are often endowed with significant political resources as well.

Devolution entails a clear transfer of political responsibility. Henceforth, the smaller center will enjoy a measure of autonomy in policymaking that will not be easily

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