Governmental Budgetary Controlling and Public Debt

The dissertation analyzes the mechanisms of budgetary controlling and the limiting of national debt both theoretically and empirically.  It is interdisciplinary in focus – economic and legal – and is supervised by Prof. M. Gerfin and Prof. A. Lienhard.

Starting Point

The national debt and its limitation stands at the center of public interest, in Switzerland not least of all since of the massive increase in debt during the 1990s.  The national debt crisis, which is linked to the financial and economic crisis, has intensified the discussion on the national debt also on an international level.
All across Switzerland, debt and deficit limits have proven to be important tools for steering the national budget and reducing the national debt.  Additional mechanisms, such as, budget referendums, spending limits, or automatic tax increase mechanisms are also playing leading roles.  The debt limit that was implemented in Switzerland on the federal level in 2003 should balance expenditures and revenues over an economic cycle.  In order to counteract the debt, the cantons have also – some for centuries – legally anchored similar tools.  They differ in their design, however, from the federally mandated solution and also from one another.

Within the framework of Federal Reform II, the German legislature introduced a debt limit in 2009 based on the Swiss model.  Such a mechanism is also being discussed at the European level.

Research Questions

• How are budgetary controlling and limits on the national debt structured in the different countries and within Switzerland?  How do the mechanisms differ in their modes of operation? 
• Are debt and deficit limits effective?
• Which enforcement mechanisms are possible and effective?

Methodology

Using econometric analyses, one can determine whether debt and deficit limits are effective on the cantonal level.  Using comparative law, cantonal and federal legal regulations, as well as international legislation on budgetary controlling, are discussed.

Anticipated Findings

The dissertation contributes to the discussion on the national debt, as well as the mechanisms for limiting deficits and debt.  It is determined whether debt and deficit limits are effective and how mechanisms for budgetary controlling must be designed so that they can be implemented.

This dissertation is beeing written by Fabienne Marti Locher under the supervision of Prof. Dr. Andreas Lienhard.