America's Fiscal Constitution: Its Triumph and Collapse.

AuthorEdwards, Chris
PositionBook review

America's Fiscal Constitution: Its Triumph and Collapse

Bill White

New York: Public Affairs, 2014, 539 pp.

When politicians write policy books, they are often shallow affairs full of party talking points. Bill White's America's Fiscal Constitution is different. It is an excellent and scholarly book.

White was mayor of Houston from 2003 to 2009, a candidate in the 2010 Texas gubernatorial election, and a Department of Energy official under President Bill Clinton. He is currently chairman of Houston Banking and an advisor to Lazard. I don't know where White found the time to author a fiscal history of the United States, but he has done so in a detailed and polished manner.

White begins his history in the early years of the Republic. Debates over fiscal issues were as central to politics back then as they are now. In the 1790s, battle lines were drawn between anti-debt and small government advocates led by Thomas Jefferson and the relatively pro-debt and big government advocates led by Alexander Hamilton.

White quotes Jefferson explaining to George Washington in 1792: "This exactly marks the difference between Colonel Hamilton's views and mine, that I would wish the debt paid tomorrow; he wishes it never to be paid, but always to be a thing wherewith to corrupt and manage the Legislature." White's book generally takes the Jeffersonian side on debt.

Since 1790, federal debt as a percentage of gross domestic product has spiked during the Civil War, World War I, the Great Depression, and World War II. There were also smaller debt bumps during other wars and recessions. In all cases, the debt was paid back steadily in the years following the crises--that is, until recently. White's book traces the ups and downs of federal debt and discusses the politicians and economic forces at work in our fiscal history.

White's main theme is that early American leaders developed an "informal constitution" for federal fiscal management, which he variously calls the "Fiscal Constitution" or the "American Fiscal Tradition." The main component of the tradition is that if debt is issued during crises, such as wars or deep recessions, it should be paid back fairly promptly. During normal times, the federal budget should be balanced.

White points to other budget traditions that have served the nation well. For example, budgets should use clear accounting, an idea going back to Jefferson's Treasury Secretary Albert Gallatin. Also, wars should be partly funded by...

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