ABSTRACT
This chapter surveys the history of long-run fiscal consolidation by the federal government of the United States. The primary goal is to understand the possibilities for, and constraints on, adopting policies that would be effective in addressing the federal government's long-term debt, structural deficits, and unfunded future obligations. The history of successful fiscal consolidations through the twentieth century reveals that tax policy played a more important role than did government retrenchment. One of the reasons was that in every consolidation effort, successful and unsuccessful, leadership in mobilizing support for reducing debt through taxation came from within the nation's financial leadership, both inside and outside of government. The domestic lenders of capital to American governments became increasingly important, particularly during the Civil War, and also exercised formidable political power in consolidation efforts. Within government, the leadership of the Federal Reserve and the Department of Treasury joined to become a major force for fiscal responsibility.
