Political business cycle and fiscal discipline in Sub-Saharan Africa

We tested the Political Business Cycle theory in Sub-Sahara Africa. To provide an empirical explanation for this nexus, this paper used unbalanced panel data from thirty-six (36) Sub-Saharan African countries between 1990 and 2018. The system Generalized Method of Moment (GMM) developed by Arrelano-Bover/Blundell-Bond was employed to analyze the collected data. The results of the system GMM revealed that the fiscal deficit is significantly large in election years and the deficit spending spills into the year after the election, though not as high as in the election year. We could not, however, find a significant effect in the pre-election year. In addition, we found evidence suggesting that though democracy significantly lowers the fiscal deficit, it promotes higher deficit spending in the election year and the year after the election. Hence, the study established the existence of a political business cycle in Sub-Saharan African countries. The study thus recommends that sound economic policies should be put in place to reduce the persistent deficit in SSA so as to maintain sustainable fiscal health, as well as the sustainability of macroeconomics, particularly enhanced industrialization, as the study found that countries' fiscal deficits are lower in more industrialized countries in the region.

Employer of Last Resort as a new ‘New Deal’: A few thoughts on Turkey

Modern Monetary Theory emerges as a plausible alternative to solve Turkey’s staggering unemployment problem. This proposed solution here is the introduction of job guarantee program, which produces a non-discretionary automatic stabilizer that fosters both price stability and full employment. As a monetary sovereign, Turkey has the capacity to use deficit spending to bring growth and provide full employment to the millions who are in involuntary unemployment. The goal here is to tame the business cycles without throwing millions into unemployment, which has social and economic ramifications. In the absence of job creation by the private sector, this can be achieved through the use of government, providing job guarantees and the state acting as an employer of last resort by creating public projects, which will be cyclically adjusted in order to achieve full employment. 

Factors Contributing to Deficit Spending in Indonesia

The issues concerning deficit spending have been a major concern in macroeconomic policies. Each country has a different method to solve the problems, including by devising appropriate deficit spending policies. This study investigates the effect of deficit spending in Indonesia. The effect of deficit management is seen from the sources to finance budget deficit, the efforts that are made, and the ability to contribute to the economy. Another research objective is to identify the magnitude of the effect of deficit spending and its effect on the national economy. This study attempts to explain that the applied model is able to determine the factors that contribute to deficit spending in Indonesia. The findings of this study reveal that both in the short- and long-run, external debts have a positive and significant effect on deficit spending. On the contrary, the economic growth and inflation rate have no significant effect on deficit spending.

High US government debt does not itself raise risks

Significance Some economists are suggesting that, over the longer term, this could cause financial markets to stop buying US debt and charge prohibitively high rates, and cause the dollar to crash. Other economists argue that more deficit spending could fuel output and so keep relative debt levels in check. Impacts The government retirement trust funds will continue to be major buyers of government debt. In the recovery and beyond, financing the debt could raise private borrowing costs, reduce business investment and slow economic growth. High and rising debt might constrain policymakers in their ability to respond to unforeseen events. A higher debt path that boosts interest rates would give the Federal Reserve more flexibility in implementing monetary policy.

A burden on future generations? How we learned to hate deficits and blame the baby boomers

The idea that public borrowing places an intolerable burden on posterity is as old as the institution of public debt itself. But the debate over deficit-spending assumed an entirely new scope and import with the rise of the fiscal state in the early twentieth century, as governments assumed greater responsibilities with regard to public welfare and found themselves subject to a new kind of conflict concerning the uses and distribution of public income. In this context, the intergenerational argument against social welfare spending became an important tool in the fight against class redistribution. With a focus on American debates, this article provides a historical sociology of the idea that deficits constitute a burden on future generations, identifying the key historical turning points when this idea acquired new political resonance. In particular, the article investigates how we learned to blame baby boomers for the alleged ills of government deficit-spending and how this now ubiquitous motif of public discourse was reintroduced by the Virginia school public choice theorist James M. Buchanan and later refined by the chief proponent of generational accounting, Laurence Kotlikoff.

The Buchanan-Wagner hypothesis: Revisiting the theory with new empirics for a spendthrift democracy

This study revisits the Buchanan-Wagner hypothesis in reference to the deficit-spending dynamics of Turkey in the period 1924 to 2008, during which the government was expanding along with the developing national economy and democracy. The empirical analysis of the hypothesis is based on the autoregressive distributed lag approach to cointegration, which is not only quite new in the literature on the Buchanan-Wagner hypothesis but also superior to other single-equation cointegration approaches. The prevailing empirics for the Buchanan-Wagner hypothesis reveal deficiencies in several respects, as they ignore the mixed orders of integration in regressors, the endogeneity of regressors, and the encompassing dynamic structure in the short and long runs. Within this context, the findings of this study imply the validity of the hypothesis for Turkey, providing empirical evidence on the premise that budget deficits financed by nontax sources are the main driving force behind the continuously increasing public spending in Turkey. This evidence is argued to be a reflection of the fact that the perceived tax price of public goods and services decreases with debtfinanced budget deficits over time.

The moral economy of early intervention

In November 2015, protests erupted in Oxford in response to the decision of the Oxfordshire County Council to cut, among other things, forty-four Children’s Centres and seven Early Intervention Hubs. The debate about whether these centres could be considered as disposable or not did not get to an agreement. I argue that the main cause of this outcome is that the opposing arguments were based on moral positions that were not only incompatible but fundamentally incommensurable. Those in favour of reducing deficit spending argue that cuts to social services (including family and children services) are unavoidable. Parents, however, refuse to accept austerity measures that will undermine the rights of their children to access services that will improve their chances in life. Neither position is based on incontrovertible evidence. On the one hand, the decision to cut a given service always involves the arbitrary evaluation of that service against other services that will not be cut. On the other, the demand to fund those services is based on the hope that early intervention initiatives will benefit children, even if the evidence that early intervention works is unconclusive or thin. On the basis of a thematic analysis of twenty-seven stories written by Oxfordshire parents, I interpret this conflict using the notion of moral economy, and argue that such an approach allows an appreciation of the link between health economics, perinatal mental health, the morality of parenting, and the early intervention discourse.

Substrate recognition induces sequential electron transfer across subunits in the nitrogenase-like DPOR complex

A key step in bacteriochlorophyll biosynthesis is the reduction of protochlorophyllide (Pchlide) to chlorophyllide (Chlide), catalyzed by dark-operative protochlorophyllide oxidoreductase (DPOR). DPOR is made of electron donor (BchL) and acceptor (BchNB) component proteins. BchNB is further composed of two subunits each of BchN and BchB arranged as an α2β2 heterotetramer with two active sites for substrate reduction. Such oligomeric architectures are found in several other electron transfer (ET) complexes, but how this architecture influences activity is unclear. Here, we describe allosteric communication between the two identical active sites in Rhodobacter sphaeroides BchNB that drives sequential and asymmetric ET. Pchlide binding to one BchNB active site initiates ET from the pre-reduced [4Fe-4S] cluster of BchNB, a process similar to the deficit spending mechanism observed in the structurally related nitrogenase complex. Pchlide binding in one active site is recognized in trans by an Asp-274 from the opposing half, which is positioned to serve as the initial proton donor. A D274A variant DPOR binds to two Pchlide molecules in the BchNB complex, but only one is bound productively, stalling Pchlide reduction in both active sites. A half-active complex combining one WT and one D274A monomer also stalled after one electron was transferred in the WT half. We propose that such sequential electron transfer in oligomeric enzymes serves as a regulatory mechanism to ensure binding and recognition of the correct substrate. The findings shed light on the functional advantages imparted by the oligomeric architecture found in many electron transfer enzymes.

Full Employment

Wartime deficit spending brought truly full employment, but millions of women were pushed out of blue-collar jobs afterward. Business leaders and conservatives defeated a full-employment bill in 1946. Capital flight, urban deindustrialization, and a double recession in the late 1950s destroyed many, especially black, communities. Under presidents Kennedy and Johnson, liberal Keynesian economists used tax cuts and deficit spending to promote more economic growth and full employment. Large-scale spending on the Vietnam War followed. Unemployment stayed below 4 percent for four years, but millions were still jobless. Some of them joined the uprisings of black people that rocked American cities. Dissenting experts realized that the government undercounted unemployment. Lyndon Johnson’s War on Poverty focused too much on fixing poor people and not enough on creating jobs for them. Later, some liberals concluded that economic growth and poverty programs could not bring real full employment. Direct job creation was essential. One such effort was the Comprehensive Employment and Training Act (CETA).