Irish Fiscal Advisory Council

The government announced the establishment of the Irish Fiscal Advisory Council (IFAC) on July 7, 2011. The IFAC is mandated to provide an assessment of:
(i) the soundness of official macro-fiscal forecasts;

(ii) the appropriateness of the fiscal stance (including the government’s stated medium-term budgetary objective); and

(iii) the consistency between budgetary plans and fiscal rules (the latter are to be specified in a Fiscal Responsibility Bill by year-end).

The IFAC will submit, at least three times a year, written reports to the Minister for Finance, which will automatically be communicated to the Oireachtas within 24 hours. This effectively means that the IFAC’s reports are published with the Minister having advance notice of their content. There are no restrictions, otherwise, on the Council’s communication with the public.

The IFAC comprises five members, appointed by the Minister for Finance for initial tenures of two to four years. The members will serve in a voluntary capacity, assisted by a small secretariat including full-time economist staff. The Council has been allocated initial funding for the remainder of 2011.

Among the range of fiscal councils in Europe, the IFAC appears most similar to the Swedish Fiscal Policy Council, both in terms of mandate and funding. For instance, the IFAC is charged with assessing, rather than producing, the official macro-fiscal forecasts, which explains its relatively modest resources compared with say, the U.K.’s Office for Budget Responsibility

-Ireland: Third Review Under the Extended Arrangement - Staff Report

Public Finance and Society

Quote of the day;

“… public finances are one of the best starting points for an investigation of society. The spirit of a people, its cultural level, its social structure, the deeds its policy may prepare — and this and more is written in its fiscal history.” He cites Goldscheid. 1917. Staatsozialismus order Staatskapitalismus. “the budget is the skeleton of the state stripped of all misleading ideologies.”

Random Course

Public Economics- from MIT OpenCourseWare

Fiscal Space

Interesting staff policy note from the Fund on Fiscal Space.

Assorted on Stimulus

Boost Private Investment to Boost the Economy- Hal Varian

M Govinda Rao: Fiscal stimulus at the state level now

Who should get the federal stimulus funds
By Edward L. Glaeser

If, When, How: A Primer on Fiscal Stimulus

The Right 'Stimulus'

IMF Spells Out Need for Global Fiscal Stimulus

"Fiscal measures should be reversible, and governments may want to precommit to unwinding some of the policies."

A lesson from Singapore

Worried about a growing public - a lesson from Singapore via Bryan Caplan;

They don't defend co-payments as a way to avoid moral hazard. They defend co-payments as a way to avoid a "buffet mentality."

Book recommendation on India

Regional Growth Dynamics in India in the Post-Economic Reform Period
Biswa Swarup Misra

BISWA SWARUP MISRA heads the Department of Economic Analysis and Policy at the Patna office of the Reserve Bank of India. He was an Economist at the Union Bank of India from 2001-2002. He is a core team member in Reserve Bank's research reports and resource person for policy documents. He has published in Banca D'Italia's Conference Volume of Workshop on Public Finance, Reserve Bank's Occasional Papers, the Journal of Quantitative Economics, and the Indian Economic Journal.

Teaching Taxation in Developing Countries

What are good books for teaching taxation in developing countries?

The Theory and Practice of Tax Reform in Developing Countries
Etisham Ahmad, Nicholas Stern
Tax Policy Handbook
Economics of Taxation (syllabus)

Design of Fiscal Rules

On design, it is useful to start the discussion with a simple comparison between budget balance rules that are combined with expenditure rules and those which are not. Historical observation is consistent with the regression results in suggesting that in general budget-balance rules that are not combined with expenditure rules are less effective. A striking example of this is the United States experience: neither the Gramm-Rudman-Hollings (GRH) Act of 1985 nor its revised version in 1987 succeeded in significantly reducing the fiscal deficit.16 A further example is the Stability and Growth Pact (SGP), which has not so far led to sustainable positions being attained, notably in large EU countries. On the other hand, when the United States turned to an expenditure-based rule, the Budget Enforcement Act (1990-2002),17 a surplus was achieved and maintained for a time. Some EU countries (e.g. Netherlands, Spain, Sweden, Finland and Czech Republic) supplemented the SGP by national rules (in most cases including some expenditure ceilings) and also enjoyed success. There were, however, some failures. For instance, after France introduced multi-year objectives for real government expenditure in 1998, its structural fiscal position deteriorated continuously until 2003, at which time it came under the European excessive deficit procedure.

There is no one-size-fits-all rule applicable to every country but there seems to be a consensus that, to be effective, rules should have several features. In particular, they should be simple to manage, understand and monitor, while flexible enough to respond to the cycle. Against this background, there are several features of expenditure rules that can explain why they have often been associated with success: not only do they exclude cyclically volatile revenues but they can be (and often are) designed to let economic stabilisers work in a downturn and to save windfall gains during an upturn; 19 they are typically more transparent than all but the simplest budget balance rule; they allow spending ministers/ministries to be held accountable;20 and they make the availability of financial resources predictable for policymakers and programme managers.

An important issue in designing fiscal rules is their possible impact on the quality of public expenditure. Both expenditure rules covering total spending and budget balance rules can potentially cause allocative inefficiencies by biasing spending towards items that are politically sensitive and difficult to cut.21 Typically governments have responded by excluding some capital items from overall spending (as done notably by Golden rules in the United Kingdom and Germany), but this may make the rule more difficult to monitor as well as easier to circumvent. Moreover, there is an element of arbitrariness in excluding physical investment from the rule but not current spending with investment attributes, such as spending on education.
The time period over which the target is to be met is also important, not least in providing flexibility to deal with cyclical fluctuations. Although enforcing the rule on a year-by-year basis appears strict, many countries do just that, with varying degrees of success. Switzerland is an example of a country combining year-by-year enforcement with cyclical flexibility by targeting a balanced budget in cyclically adjusted terms. The United Kingdom pursues another approach: its budget-balance rule22 holds over the business cycle. Such a procedure, however, provides less accurate short-term guidance. As well, rules defined over the cycle or embodying some kind of cyclical adjustment require a subjective23 assessment to be made about the cycle’s start and end dates and/or the size of the output gap, which (together with data revisions) creates a degree of uncertainty about whether or not the rule was (or will be) met. The same objections apply to rules such as the SGP that allow normal procedures to be waived in conditions of pronounced cyclical weakness.

-Fiscal consolidation: lessons from past experience

All the Public Finance you need

Ministry of Silly Walks

Latest edition of OECD Journal of Budgeting

Volume 8 (2008)Number 2:
The Role of the State and Public Finance in the Next Generation / Budgeting in Russia / Budgeting in Estonia / Budgeting in Australia

The Role of the State and Public Finance in the Next Generation
Abstract;This article discusses the economic role of the state as it evolved during the 20th century, starting with how current tax systems developed and how fiscal termites can weaken the foundations of tax systems, examining the spending side of the government role, and speculating on future developments, particularly in the Latin American context. by Vito TANZI

Budgeting in Russia
Abstract;Russia's budgeting procedures have been in transition since the adoption of the Budget Code in 1998. Major revisions of the Code were undertaken in 2003, 2004 and 2007. This article explores the many facets of budgeting in the Russian Federation, including budget formulation, parliamentary approval, budget execution, accounting and auditing, and financial relations between levels of government.
by Dirk-Jan Kraan, Daniel Bergvall, Ian Hawkesworth, Valentina Kostyleva and Matthias Witt.

Budgeting in Estonia
Abstract;Since independence, Estonia has been at the forefront of institutional reform in the area of financial management. Budget formulation is divided into two distinct stages: strategic planning and preparation of the annual budget that is submitted to Parliament. This article describes key characteristics of budgeting in Estonia, including the development of the State Budget Strategy, the parliamentary process, the organisation of budget execution, and systems for accounting and auditing.
By Dirk-Jan Kraan, Joachim Wehner and Kirsten Richter

Is Gruber's book the best introductory textbook

Public Finance and Public Policy, the new textbook by Jonathan Gruber, is not only the best public finance textbooks I've ever read it is one of the best textbooks I've read in any field...

Gruber covers all the major programs - education, social security, unemployment insurance, Medicaid and Medicare, the tax system etc. - and in each case he carefully explains the institutional details and then he evaulates the empirical evidence focusing on the most telling pieces of evidence (rather than trying to cover everything that has ever been written as in a review paper).

Gruber is so good on the empirical research that this book would be a useful supplement to an applied econometrics class. Just flipping through it and reading the boxed Empirical Evidence sections gives a good feel for what the cutting edge questions and techniques are in empirical research.

-Alex Tabarrok