ABSTRACT
The objective of the research presented in this book is to investigate the capacity of federal states to coordinate the efforts of the federal government and subnational governments in solving a very prominent and long-lasting policy problem. The problem we focused on is the accumulation of public debts and excessive deficit-making (the “deficit problem”). Coordination seemed on the one hand necessary and on the other hand problematic. Coordination cannot be taken for granted-as we assumed-because of a structural disposition of subnational governments to maintain what we have called “type-1 policies.” These are policies that satisfy voter demands and require that governments spend money. According to Public Choice Theory, chances for re-election are better if governments are able to implement such “type-1 policies” instead of “type-2 policies.” The latter are part of consolidation strategies and are built on austerity measures. The search for policy solutions to overcome such coordination problems was inspired by the educated guess that such solutions could have negative externalities on federal relations. We expected that conflicts about “standard interests” (the authority and discretion of federal actors) might affect the existing institutional equilibrium in the federation. In short, we expected spillovers from the problem-solving stream to the power stream. In order to understand the dynamics of the search for policy solutions within federal settings, we applied a heuristic process model designed to understand under what conditions the “robustness” of the federation could be maintained, and under what conditions it was endangered. The concept of “robustness” needs to be specified. For us, “robustness” means the capacity of a federal system to solve policy problems like excessive debts and deficits (effectiveness) and at the same time to avoid a destabilization of the “institutional equilibrium” (“federal stability”). The “institutional equilibrium” defines the institutionalized consensus on the authority distribution and discretion margins for all federal actors. Following the discussion in the “second generation of fiscal federalism” or “political federalism” (see Chapter 2), effectiveness means to successfully contain opportunism by subnational governments (SNG) in fiscal policy-making, that is, to avoid giving in to abundant deficit-making at the cost of common pool resources. A first indicator of effectiveness was the adoption of stabilization arrangements, notably of fiscal rules
that comprised the subnational government level, and the establishment of working enforcement mechanisms. Effectiveness was given if the subnational share of general government debt did not increase, when their deficit rates declined, and when there were strong indications in the literature that the rules were obeyed by SNG for a longer period of time. Consequently, effectiveness means that policy problems are successfully solved in the problem-solving stream. “Federal stability” prevailed when, first, significant problem pressure was given that, second, gave rise to conflicts about the formulation of policy solutions and/or their maintenance, and did, third, trigger federal safeguards that were able to prevent a “conflict overload” that endangered the institutional equilibrium. The absence of institutional reforms does, therefore, not signal federal stability. It needs the existence of problems and conflicts as well as the triggering of safeguards that can deal with problems and conflicts to speak of federal stability.
