Are Fiscal Rules an Effective Restraint on Government Debt?

Abstract

This policy brief will assess the underlying problems with the United States’ budgetary process and the issues that arise as a result of the country’s current fiscal trajectory. We explore the role that spending rules play in restraining the growth of government spending wherever they are implemented. Through reviewing the existing literature on fiscal rules, we attempt to determine which aspects of effective fiscal rules are most successful in curtailing government largesse. Finally, we highlight four international examples of countries where the implementation of fiscal rules has been associated with a declining debt-to-GDP ratio and broadly sustainable patterns of government spending.