Category Archives: Fiscal History

Deficit owls

Meet the deficit owls.

The European Debt Crisis in an American Fiscal Mirror

First post. A comment on an article by C. Randall Henning and Martin Kessler written for the NEP-HIS blog edited by Bernardo Bátiz Lazo. Enjoy.

The NEP-HIS Blog

Fiscal federalism: US history for architects of Europe’s fiscal union

By C. Randall Henning ( and Martin Kessler (


Abstract: European debates over reform of the fiscal governance of the euro area frequently reference fiscal federalism in the United States. The “fiscal compact” agreed by the European Council during 2011 provided for the introduction of, among other things, constitutional rules or framework laws known as “debt brakes” in the member states of the euro area. In light of the compact and proposals for deeper fiscal union, we review US fiscal federalism from Alexander Hamilton to the present. We note that within the US system the states are “sovereign”: The federal government does not mandate balanced budgets nor, since the 1840s, does it bail out states in fiscal trouble. States adopted balanced budget rules of varying strength during the nineteenth century and these rules limit debt accumulation. Before introducing debt brakes for euro area member states, however, Europeans should consider three important…

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