#GOVERNMENT BUDGET FULL#

These models provide sharp statements about optimal time paths of taxes, borrowing, and returns on debt for financing a large temporary government expenditure. In both models, the government wishes to minimize dead-weight losses from distorting taxes. In both the Barro (1979) and Lucas and Stokey (1983) models, wars are well-understood, purely exogenous shocks to government spending, and taxpayers and bondholders are the same people. Previous authors have estimated revenues from this tax for various wars, but due to an absence of consistent data across wars on market wages and numbers of men drafted, we ignore this implicit tax in the revenue decomposition reported in Table 27.1. 56 By requiring young men to join the military at below market wages, a reluctant soldier or sailor paid in kind a tax equal to the difference between what he could have earned elsewhere and his actual military pay. In order to raise large fighting forces without paying market wages, during the Civil War, World War I, World War II, the Korean War, and the Vietnam War, the federal government drafted men into the military. government used each of these measures, with the most important of these measures having been the draft. However governments can also raise resources by nationalizing private assets, confiscating goods from enemies and its own people, and drafting its citizens into the military. (27.22), we consider three explicit sources of revenue: taxes, debt, and money creation. Sargent, in The Handbook of Historical Economics, 2021 27.8 Qualifications MTEFs also differ quite significantly from one country to another in their political commitment and how binding they are, as well as their planning horizons, coverage and level of detail. §4.8), although the links between these plans and MTEFs are sometimes quite weak. This also addresses the problem where a one year ‘use it or lose it’ budget approval forces a contracting authority to choose a sub-optimal project over a better project simply because the capital spending requirement for the poorer project falls within a year while the better project’s capital spending requirement falls over several years.Īn MTEF may be based on longer-term high-level public-investment plans and national-development strategies ( cf. Some governments use a separate budget-approval process for all spending commitments that fall beyond one year.

#GOVERNMENT BUDGET FULL#

To address this issue, medium-term expenditure frameworks (MTEFs) are increasingly being used as a means to forecast budget commitments into the future, although even these are unlikely to cover the full term of a PPP contract. But most of the service-fees for a PPP usually fall due long after this. Government budgets usually have time horizons of one to three years.

Yescombe, Edward Farquharson, in Public-Private Partnerships for Infrastructure (Second Edition), 2018 §9.3.1 Long-Term PPP Spending Commitments