In Chapter 7, we conclude by placing both our theoretical and methodological contributions within the wider world of government decision-making. Our theory begins with the core assumption that government ideology drives the budgetary priorities of governments. With a blank slate, these ideological preferences would steer governments in shaping budgets. While this is a useful place to start theoretical debate about political budgeting, an important part of our argument is about how contextual factors influence whether governments can achieve their ideological priorities. Throughout the book, we find many instances in which context overwhelms ideology to drive government budgets. In developing our theoretical ideas about the interplay between ideology and contexts, we emphasize the importance of recognizing the interlinked nature of the different parts of political budgets. We take advantage of recent advances in dynamic compositional models and panel vector autoregressive (pVAR) models when testing our ideas. To make the results from these complex models accessible, we rely heavily on graphical presentations of our findings. Together, our theory of budgets and the methods we use to test it are all intended to bring studies closer to the messy but fascinating real world of political budgeting.

This chapter examines budgeting in the United States, its budgetary institutions, culture, and policies, from the founding of the republic in the 1700s through the Trump administration. The US Constitution is the world’s oldest functioning government document, and its budgetary rules reflect the country’s ongoing debate about fiscal federalism, and how the federal goverment should manage its fiscal and macroeconomic policies.

Government expenditure needs to be financed. The two ways to do so are via taxes or via deficits and debt. For the first 90 of the past 150 years, public expenditure broadly grew in line with revenue, except during wars and times of crises. This changed fundamentally in the 1960s and early 1970s as the ‘Keynesian revolution’ took hold.Over the past fifty years, revenue rose strongly, but public spending often increased even faster. Chronic deficits stoked a high and growing stock of public debt in much of the advanced world. Public debt in the largest countries is now similar to the level prevailing at the end of the Second World War. Future governments will also face significant liabilities from increasing public expenditure related to population ageing, as well as fiscal risks from the financial sector. These liabilities and risks imply higher expenditure which will need to be financed. At the same time, there are political and economic limits to both taxation and indebtedness.

Rules and institutions are at the heart of effective and well-managed governments that focus on their core tasks. Sound rules and institutions constrain policy-makers and guide the expectations of citizens. This promotes trust, opportunities, prosperity and freedom. It prevents hubris and excessive expectations about what governments should and can do. Sound rules and institutions constrain deficits, spending and debt. They govern the process of budget-making and implementation and ensure the effectiveness and efficiency of spending programmes. They also help constrain government activities relative to the private sector. Rules and institutions for the banking and shadow banking sectors protect government and citizens from the fiscal risks of financial crisis. The international institutional architecture underpins stability across both countries and continents. Fiscal rules and institutions have gone through phases of support and decline, and there has been more progress in the financial than in the fiscal sphere. We need to re-strengthen our rules and institutions to tackle successfully the challenges of the ‘spending state’: to keep government lean, efficient and sustainable.

We are living in a golden age for the political sociology of public finance. The study of taxation and public debt often has been assumed to belong to the domain of economics, but fiscal policies, like other public policies, are the outcomes of political processes that can be studied sociologically, and the eclectic theoretical toolkit of contemporary political sociology – stocked as it is with concepts and middle-range theories from pluralist, institutionalist, power elite, Marxist, feminist, post-structuralist, and other theoretical traditions – can be applied as well to this domain as to any other.