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Süssmuth, Bernd; von Weizsäcker , Robert K. --- "Institutional determinants of public debt: a political economy perspective" [2006] ELECD 486; in Tremmel, Chet Joerg (ed), "Handbook of Intergenerational Justice" (Edward Elgar Publishing, 2006)

Book Title: Handbook of Intergenerational Justice

Editor(s): Tremmel, Chet Joerg

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781845429003

Section: Chapter 9

Section Title: Institutional determinants of public debt: a political economy perspective

Author(s): Süssmuth, Bernd; von Weizsäcker , Robert K.

Extract:

9 Institutional determinants of public debt:
a political economy perspective
Bernd Süssmuth and Robert K. von Weizsäcker


Introduction
What militates in favor of public debt? `Hardly anything' we would answer
from an economist's point of view. `A lot' might be the straight answer of a
politician. In Germany, for example contemporary conservative politicians
frequently claim that every German newborn is burdened with an amount of
public debt equalling some (hundred) thousand Euro. A likewise frequently
raised argument by their opponents is the necessity of public debt as a means
to finance prospective investment in education, infrastructure, and so on,
that is, as a means of ensuring intergenerational equity. The aim of this
chapter is to scrutinize this antagonism and its institutional determinants in
representative democracies.

The rise of the problem
The dramatic increase of public indebtedness in recent years is an inter-
national phenomenon observed for many industrialized economies. Figure
9.1 makes the point. Presently, public debt in Germany has reached its post-
World War II all time high. In real terms and, certainly, not solely due to
German Reunification indebtedness is of an enormous dimension. Table 9.1
summarizes the recent development of public debt and interest payments.
Interest payments of issued public securities have become the third largest
item of total public expenditures. In a dynamic context, public net borrowing
to interest payment on average equalled 90 percent for the period 1990­2004
according to calculations based on figures given in the annual report ...