, 8 tweets, 5 min read Read on Twitter
1/ A key distinction is between rules and institutions. The argument that monetary policy is also externalised misses the point that a) there is much more consensus about sound monetary policy and b) this consensus (price stability) is set as a goal for an external institution
2/ with significant discretion over the means for how to achieve it (see unconventional monetary policy). In many cases there is also an employment target in addition to price stability and many feedback loops to the government through appointments, letters why targets are
3/ missed etc. I don't think you can easily compare this setup with a constititutionalised debt break. A reason sometimes cited for why a constitutional debt break is necessary is "temporal consistency" and "binding the hands of future politicians". It is beyond me how you
4/ cannot see the democratic problem here. Allowing today's politicians to bind their future colleagues' hands raises significant legitimacy problems. Temporal consistency also flies in the face of the ability to change the political direction through elections.
5/ So what could a middle way be? You could create a fiscal institution rather than a constitutionalised rule (see @sjwrenlewis for instance) and a government can pass a fiscal law or a set of laws to bind it to a certain fiscal policy trajectory. That external fiscal
6/ institution could then check compliance or suggest a change of fiscal policy in changed circumstances. This would create a solid policy and institutional framework for each government's fiscal policy (whatever the preference might be) but not create a democratic problem
7/ as each government could change course according to its priorities. This would in effect be a mixture of Gordon Brown's "Golden Rule" approach with an external body such as the Office for Budget Responsibility to oversee it.
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