Channels, Spring 2018

Channels • 2018 • Volume 2 • Number 2 Page 37 Nevertheless, Bohn does not rely on Barro’s model to exclusion, so his paper cannot be considered a direct outgrowth of the latter’s work. 128 His paper does note that U.S. fiscal policy since 1980 demonstrates a consistent, if not statistically significant, departure from previous, expected patterns. 129 This could be a result of changing views of governmental actors as policy impacts political incentives. Maintaining deficits over a long period of time may make the public and their representatives comfortable with debt, weakening the necessity of deficit reduction. However, Bohn does not accept this possibility, noting: “frequent primary budget deficits do not provide convincing evidence against sustainability, because at low interest rates, a variety of sustainable policies will display primary deficits on average and potentially for long periods.” 130 In Bohn’s paper, and the articles that rely on it, Buchanan’s methods are set aside, and his conclusions are therefore less likely to be confirmed. This trend is revealed in the modern literature on public debt. Despite the trend away from the work of James Buchanan in journal articles, a textbook analysis sends a somewhat mitigating signal. The book Economics of the Public Sector is an instructive example as its primary author is Dr. Joseph Stiglitz, an economist in the New Keynesian tradition who has done significant work on market failure. Interestingly, when Stiglitz discusses the burden of the public debt, he begins with some of the basic arguments made by Buchanan. For example, “By borrowing, the government places the burden of reduced consumption on future generations.” 131 This is a straightforward statement of Buchanan’s basic argument in Public Principles of Public Debt , which indicates that even members of schools opposed to Buchanan’s theory have accepted or conceded to this element of his thought. However, when moving to different parts of the discussion of public debt that Buchanan developed, Stiglitz does not always align with his fellow Nobel prize-winner. For instance, Stiglitz discusses the Keynesian argument that “debt does not matter because we owe it to ourselves,” but does not make use of Buchanan’s discussion. 132 Stiglitz refutes the Keynesian argument, but on grounds that the original Keynesians would have accepted, when he states “we do not, in fact, owe the money to ourselves. The United States is borrowing abroad and becoming indebted to foreigners.” 133 Buchanan uses methodological individualism to differentiate bondholders and taxpayers to make an analysis that suggests debt issues is always a burden, while Stiglitz relies on the tenet of the new orthodoxy that differentiates internal and external debt which Buchanan also attacked. 128 Ibid, 957. “The main difference between Table II and Barro's and Kremers' specification is that both Barro and Kremers use (scaled) changes in nominal government debt as the dependent variable and add a proxy for expected inflation as regressor. This suggests that their inability to find mean reversion is due to problems associated with estimating inflation. All the data in regressions 3 and 4 are taken directly from Barro [1986a] so that data differences cannot explain the different results.” 129 Ibid, 959. 130 Ibid, 960. 131 Joseph E. Stiglitz, Jay K. Rosengard, The Economics of the Public Sector , (W.W. Norton and Company, New York: NY, 2015), 869. 132 Ibid, 870. 133 Ibid, 870.