German Experience with Fiscal Rules: Lessons for the US Budget Process

by Adam S. Posen, Peterson Institute for International Economics

July 27, 2005

I greatly appreciate the opportunity to testify before this Committee during its consideration of multiyear budgeting processes and possible biennial budgeting reforms in the United States. In particular, I would like to commend the Committee for taking an international perspective on the pitfalls and potentially useful practices involved in setting fiscal policy from a long-term perspective. There are more policy options available than can be usefully considered either on the basis of US experience or theoretical argument alone. As the House of Representatives faces the current mounting US Federal budget deficits and long-term commitments to expenditure, reflecting both domestic and security needs, it is worth examining the possibility that new budget processes could exert constructive discipline on US fiscal policy.

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