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Democracy and government spending

Summary:
It is sometimes claimed that governments overspend due to pressure from the public. That may or may not be true, but in Hong Kong the reverse seems to be happening.  As it becomes less democratic, spending is rising: Hong Kong’s renowned fiscal reserves are at risk after the city’s opposition-free legislature approved record public expenditure over the past year, analysts have warned. . . . Following Beijing’s overhaul of the electoral system that barred “unpatriotic” candidates from running, opposition politicians are unlikely to make a return to the legislature. “Without proper checks and balances, the pressure on [fiscal reserves] will increase,” said Kevin Lai, chief economist for Asia excluding Japan at Daiwa Capital Markets. Andy Kwan, a director at ACE

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It is sometimes claimed that governments overspend due to pressure from the public. That may or may not be true, but in Hong Kong the reverse seems to be happening.  As it becomes less democratic, spending is rising:

Hong Kong’s renowned fiscal reserves are at risk after the city’s opposition-free legislature approved record public expenditure over the past year, analysts have warned. . . .

Following Beijing’s overhaul of the electoral system that barred “unpatriotic” candidates from running, opposition politicians are unlikely to make a return to the legislature.

“Without proper checks and balances, the pressure on [fiscal reserves] will increase,” said Kevin Lai, chief economist for Asia excluding Japan at Daiwa Capital Markets.

Andy Kwan, a director at ACE Centre for Business and Economic Research, agreed, saying the government could “easily no longer have fiscal discipline . . . especially when it comes to huge expenditures for upcoming large-scale projects”.

Of all the European governments, Switzerland’s is the most directly accountable to voters.  Switzerland also has the lowest level of public spending in Western Europe (as a share of GDP.)

I wonder.  Is it pressure from “the public”, or is it pressure from special interest groups?

Scott Sumner
Scott B. Sumner is Research Fellow at the Independent Institute, the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment". In May 2012, Chicago Fed President Charles L. Evans became the first sitting member of the Federal Open Market Committee (FOMC) to endorse the idea.

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