ABSTRACT
The state can finance increased budgetary outlays in three general ways: first, by creating state enterprises that produce surpluses which in turn may be used to underwrite social capital and social expense expenditures; second, by issuing debt and borrowing against future tax revenues; third, by raising tax rates and introducing new taxes. In the wake of the Commission's investigations and the Budget Bureau director's follow-up recommendations, the federal government abandoned most of these activities to private capital. Federal borrowing and the federal debt and state and local government borrowing and debt are governed by very different political economic principles. The most significant difference between federal and state and local borrowing concerns the relationship between finance capital and the federal and state and local treasuries. The only important power that financial institutions exercise over the federal government is their ability to compel the Treasury to pay high interest rates.
