 |
Fiscal Responsibility Laws for Subnational Discipline: The Latino Experience
| |
| | Unformatted Document Text:
The successes of the Menem-Cavallo team in getting the provinces to go along
with the national adjustment program resulted from an unusual conjuncture of historical opportunities. Provinces followed a pattern of fiscal restraint where the provincial government was of the same party as the national president. Indeed this pattern seems to go back to the 1980s as well (Jones, Sanguinetti, and Tommasi 1997). Next to the province of Buenos Aires, Santa Fe was the most important case of a Justicialista province adjusting promptly after the start of stabilization. Getting those two to adjust before the 1995 crisis provided a critical mass of fiscally sound provinces and allowed the central government to take a hard line in forcing the other provinces to adjust. By the late 1990s, however, the political context was changing, as the Justicialistas gained the important province of Cordoba but rifts within the party put all-important Buenos Aires effectively in the opposition.
FRLs. At the natural level, faced with a deteriorating budget balance and growing
debt payments, the Argentine Congress approved a Fiscal Solvency Law in September 1999. This law required achieving budget balance at the national level of government by 2003. Apart from establishing numeric limits for the central government’s fiscal deficit, it also limited the growth of expenditures. Furthermore, the law stipulated the adoption of pluriannual budgeting, the creation of a Countercyclical Fiscal Fund, and the implementation of transparency measures to increase the availability of information regarding the state of public finances. Although the law did not include conditions for subnational governments, it invited the provinces to pass similar laws at the subnational level.
9
Regarding the limits on budget deficits, the Law established that fiscal balance
had to be reached no later than 2003, and it set nominal ceilings for the national-level non-financial public sector deficit between 1999 and 2002. The Fiscal Solvency Law was modified by the 2001 Budgetary Law, which relaxed the deficit ceilings, and extended the date at which budget balance should be achieved until 2005. Table 3 shows the limits imposed by the Fiscal Solvency Law and its modification, together with the actual budget outcomes between 1999 and 2001. Contrary to the optimism expressed by some analysts of the Argentine case,
10
the rule was broken in every year.
9
The exclusion of limits on subnational governments was a fundamental weakness of the rule. In a country
with a federal fiscal system as the one in Argentina, fiscal rules would only make sense if they encompass all relevant governmental levels. Otherwise, they would simply be non-binding. It would be like telling a person that they can only spend $500 a month using their left hand.
10
See, for instance, Kopits, Jimenez and Manoel (2000).
19
|
| |
| |
|
|
The successes of the Menem-Cavallo team in getting the provinces to go along
with the national adjustment program resulted from an unusual conjuncture of historical
opportunities. Provinces followed a pattern of fiscal restraint where the provincial
government was of the same party as the national president. Indeed this pattern seems to
go back to the 1980s as well (Jones, Sanguinetti, and Tommasi 1997). Next to the
province of Buenos Aires, Santa Fe was the most important case of a Justicialista
province adjusting promptly after the start of stabilization. Getting those two to adjust
before the 1995 crisis provided a critical mass of fiscally sound provinces and allowed
the central government to take a hard line in forcing the other provinces to adjust. By the
late 1990s, however, the political context was changing, as the Justicialistas gained the
important province of Cordoba but rifts within the party put all-important Buenos Aires
effectively in the opposition.
FRLs. At the natural level, faced with a deteriorating budget balance and growing
debt payments, the Argentine Congress approved a Fiscal Solvency Law in September
1999. This law required achieving budget balance at the national level of government by
2003. Apart from establishing numeric limits for the central government’s fiscal deficit, it
also limited the growth of expenditures. Furthermore, the law stipulated the adoption of
pluriannual budgeting, the creation of a Countercyclical Fiscal Fund, and the
implementation of transparency measures to increase the availability of information
regarding the state of public finances. Although the law did not include conditions for
subnational governments, it invited the provinces to pass similar laws at the subnational
level.
Regarding the limits on budget deficits, the Law established that fiscal balance
had to be reached no later than 2003, and it set nominal ceilings for the national-level
non-financial public sector deficit between 1999 and 2002. The Fiscal Solvency Law was
modified by the 2001 Budgetary Law, which relaxed the deficit ceilings, and extended
the date at which budget balance should be achieved until 2005. Table 3 shows the limits
imposed by the Fiscal Solvency Law and its modification, together with the actual budget
outcomes between 1999 and 2001. Contrary to the optimism expressed by some analysts
of the Argentine case,
9
The exclusion of limits on subnational governments was a fundamental weakness of the rule. In a country
with a federal fiscal system as the one in Argentina, fiscal rules would only make sense if they encompass
all relevant governmental levels. Otherwise, they would simply be non-binding. It would be like telling a
person that they can only spend $500 a month using their left hand.
10
See, for instance, Kopits, Jimenez and Manoel (2000).
19
|
|
 Convention | | All Academic Convention makes running your annual conference simple and cost effective. It is your online solution for abstract management, peer review, and scheduling for your annual meeting or convention. | | Submission - Custom fields, multiple submission types, tracks, audio visual, multiple upload formats, automatic conversion to pdf. | | Review - Peer Review, Bulk reviewer assignment, bulk emails, ranking, z-score statistics, and multiple worksheets! | | Reports - Many standard and custom reports generated while you wait. Print programs with participant indexes, event grids, and more! | | Scheduling - Flexible and convenient grid scheduling within rooms and buildings. Conflict checking and advanced filtering. | | Communication - Bulk email tools to help your administrators send reminders and responses. Use form letters, a message center, and much more! | | Management - Search tools, duplicate people management, editing tools, submission transfers, many tools to manage a variety of conference management headaches! | | Click here for more information. |
|
|
|
| |
|
|
|
