Macmillan Learning
Why does public choice theory suggest that deficit spending is more likely to occur, even though it shifts the cost of
government to the next generation?
It's easier to borrow because inflation will reduce the real value of the money to be repaid.
Politicians are self-interested in keeping their jobs, and therefore favor expansionary fiscal policies.
Budget surpluses are not permitted under public choice theory because it reduces the effect of the multiplier.
Politicians prefer to raise taxes when economic growth is strong while also raising government spending by more,
creating a deficit.
