[Joseph_E._Stiglitz,_Carl_E._Walsh]_Economics(Bookos.org) (1)

campaign contributions affect the behavior of politicians, and thus the outcomes of
political processes, has become widespread, growing numbers of legislators and
activists have argued for the need to reform campaign contribution laws.
Wrap-Up
SOURCES OF PUBLIC FAILURES
Incentives and constraints
Due process
Constrained ability to make long-term commitments
Political pressures
Pork barrel projects
Power of lobbyists who make campaign contributions
Budgeting and spending constraints
Soft budget constraints
Annual appropriations process
Rigid procurement rules
Imperfect information
Unforeseen changes in behavior resulting from government action
Problems in collective decision making
Current and Recent Controversies
in the Economics of the Public
Sector
A good number of the controversies in public policy revolve around the role of the
government in the economy. In the following paragraphs, we describe three of the
major issues.
DEALING WITH THE DEFICIT
The past twenty-five years have seen large swings in the federal government’s budget
balance. In 1981, President Ronald Reagan engineered a large tax cut. As a result, the
U.S. government’s expenditures outpaced its revenues and the government ran huge
deficits that continued throughout the 1980s. At its worst, the deficit reached almost
$300 billion in the early 1990s. When the government runs a deficit, spending more
than it collects in taxes, it must borrow to make up the difference. The federal debt
is the total amount that the government owes as a result of this borrowing, and it
rose from $3,500 for every man, woman, and child in the United States in 1981 to
just over $14,000 in 1996.
CURRENT AND RECENT CONTROVERSIES IN THE ECONOMICS OF THE PUBLIC SECTOR ∂ 395