US Capital
Public Finance
Econ 950
GMU, Spring 2011 

Professor Roger D. Congleton
Old Roman Capital (the Palatine) 

 Class Room: West 1001: 7:20 - 10:00
Snow News 
Hillman, A. L. (2003) Public Finance and Public Policy, Responsibilities and Limitations of Government. Cambridge: Cambridge University Press

Tanzi, V. and L. Schuknecht (2000) Public Spending in the 20th Century: A Global Perspective. Cambridge: Cambridge University Press.

Congleton, R. D. and B. Swedenborg (2006) Democratic Constitutional Design and Public Policy. Cambridge Mass: MIT Press.
  Office Hours: 
Tuesday, 1:30-2:45,
Wednesday 1:30-3:45 

and by appointment
Class Notes,  available via this website, (will be updated during semester)
University post poned class for Pres Obama's Inauguration
Pres Approval Ratings (WSJ)
Introduction: Overview of fical policy in the United States and OECD countries: growth of tax and expenditures, composition of, increasing centralization. Theories of governmental action, the link between "optimal" expenditures and taxation.

Welfare Economics: Positive and Normative Analysis
: Positive and nomative analysis: the Pareto principles, Cost-Benefit Analysis, Rational choice as an application of cost-benefit analysis. (Geometrical Review)
AH: 1 T&S 2
GAO overview of US gov finance (report)
World Bank Statistics

Dow and GNP qtr changes
Public Goods and Externalities: Public and Private Goods, the free rider problem; Pareto optimal supply of public goods, Samuelsonian,and Lindalh Taxes; Externalities and Market Failures, Pigovian taxes. Applications: national defense, clean air and water, highways, welfare
AH: 2.1, 2.2, 4.1,
4A, 4C
Principles of Tax Analysis: Impact of taxes on market prices and output; deadweight loss in the long and short run; neutral taxes and excess burden; Ramsay taxation, progressive and proportional income taxes and the labor-leisure tradeoff. Applications: property taxes, excise taxes, head taxes, and income taxes.
Normative Principles of Tax Analysis   Theories of Optimal Taxation: Ramsay and Henry Georgian taxation (minimizing dead weight loss), Utilitarian: progressive and regressive taxation, neutral taxation, Contractarian theories of taxation (Buchanan and Rawls), Benefit Taxation (Lindalh), generality norms.   
AH: 2E, 7.1 and 7.2
US Tax History
Tax Data: Overviews

AH 2,5,7
2/24 Principles of Expenditure Analysis and Debt: Impacts of subsides on market equilibria, deadwieght losses in the long and short run, conditional marginal and lump sum subsides. Applications: farm subsidies, food stamps, rent subsidies, public education, and unemployment insurance. Altruism, Ricardian neutrality, limits to inter-generational shifting of taxes, political biases favoring debt over taxes, Keynesian macroeconomics, crowding out, balanced budget amendments, redistribution.  The Geometry of Expenditure Analysis.
AH:  2.1, 5.2
T&S 3, 5
Data from the Statistical Abstract of the United States

OECD data on Debt

Public Finance and Relationships Between Governments: Voting with Your Feet (the Tiebout Model), Decentralization, Intergovernmental Externalities and Economies of Scale (an optimal federal system). Applications: decentralization, fiscal federalism, capital flight.
AH: 3.1, 3.2, 4.2
C&S 8  Mueller on Fed
Study Guide I
The Political Demand for Government Services (and Taxes): The median voter model and the demand for public services. The median voter model, bureaucracy as an interest group, interest groups, rent-seeking, fiscal illusion, and the jury theorem. Interest Groups and Public Policy: Economic and Ideological Special Interests and Rent-Seeking Losses
AH: 6.1, 6.2,
 6.3, 6C, AH: 9.1
No Class / Spring Break Paper Topics
Institutions and the Effective Demand for Government Services Aggregating Preferences and Intra-Governmental Bargaining. The effects of electoral systems, bicameralism, presidential and prime ministerial institutions on government expenditures, taxation and debt.
C&S 1, 3,11 T&S 8
The Growth of Government Services
Discussion and Review for the First Exam (last hour)
EXAMINATION (take home)

The Economic and Political Demand for Social Insurance: Is it all about security or transfers? Analysis of the political demand for economic, health, and longevity insurance. Has social insurance become the "main product" of Western democracy?
T&S 1
A Liberal Welfare State? 
4/14 Applications to Contemporary Public Finance Issues: Overview of Social Security (notes) Paygo, Digressive taxation, Myth of the "Lock Box,"  The Future of Social Security (History)
AH: 5.1, 5B, 10.1, 10.B
Rise of the Welfare State
WHO on Healthcare
Applications to Contemporary Public Finance Issues: Overview of Taxation and Reform (notes), Decentralization, International Taxation and Growth, Future / Recent Tax Reforms (CBO analysis), Analsysis of Major Tax Reforms (US Treasury White Paper, 2002, O'Neill)  History of Taxation in the US
AH: 7A, 7B, 7C
Pres Bush's Panel on Tax Reform
OMB-2009 Budget Proposal
GEF  Paper
Paper Workshop (scheduled for Carow Hall 10:00 - 1:00)
5/5** An Overview of Public Finance

14-20 Page research paper due midnight via e-mail on an applied public finance topic


 ** Dates may be changed.