ABSTRACT
A typical problem of democratic political systems is their tendency to spend money on behalf of lobbies and interest groups in exchange for their supporting or at least tolerating the government. As a result, public deficits occur which may have serious economic consequences, for example, by causing higher interest rates and crowding out of investment, increased future tax burdens in order to cover the debt, and a lower scope of public activity due to rising shares of interest payments in the budget. High fiscal deficits, at least if persistent or rising, are thus considered a negative effect of politics in the mainstream economic literature.
