Channels, Spring 2018

Channels • 2018 • Volume 2 • Number 2 Page 25 have been reasonable, given a government objective of “stabilizing anticipated overall tax rates over time.” 60 To summarize, he wrote as follows: The major movements in privately held, interest-bearing federal debt can be explained as aspects of a policy for achieving an intertemporally efficient collection of net revenues in the face of fluctuations in government expenditures, national income, and inflation. There is also some indication that the (random) departures of debt changes from the regular pattern have contributed to movements in the unemployment rate and output. However, the fluctuations from this source that have presently been isolated are substantially smaller than those associated with monetary disturbances. 61 As a result of this thesis, where government debt is understood to vary according to efficient and skillful policy-making with logical long-term objectives, Barro found the suspicion of the public debt size and process to be unfortunate. He remarked that it was “disturbing” to see a push toward a constitutionally mandated balanced federal budget because of the resulting inefficiencies that this would no doubt create for government financial officials in action. 62 Buchanan was by this time involved in exactly the type of political action Barro was critiquing. Given his view of debt as burdensome to future generations, the former’s foundational work in the area of public choice economics and public finance naturally led him to the recourse of a balanced budget amendment and as something incentivized to current taxpayers of finite lives. Nevertheless, despite Buchanan’s clear authority, Barro carried forward his critiques on empirical grounds, arguing that policy of Buchanan’s mode, [W]ould be expected to achieve some reduction in the size of the public sector at the expense of increased misallocation per unit of government spending. Such policies seem clearly to be dominated by direct restrictions on the amount of government expenditure, especially in the area of transfers, and by other direct limitations on the scope of governmental powers. 63 Barro seemingly preferred a focus on efficiency rather than limitation, and as his paper promoted the existing efficiency of government debt decisions, drastic action was unnecessary. Buchanan’s Critiques of Barro Buchanan responded sharply to Barro’s entrance into the dialogue over public debt with a number of individual and cooperative articles. When addressing Barro’s overlapping generations model, Buchanan first notes that Barro’s model of bond issue does not 60 Robert J. Barro, “Federal Deficit Policy and the Effect of Public Debt Shocks,” Journal of Money, Credit, and Banking 12, no. 4, (Nov., 1980), 753. 61 Ibid, 760. 62 Ibid, 760. 63 Ibid, 760.