The Fiscal Squeeze: Budgets Between Fiscal Illusion, Fiscal Commons, and the Tyranny of Experts

Diana W. Thomas, Michael D. Thomas

Research output: Chapter in Book/Report/Conference proceedingChapter


The combination of subsidiarity with the principles of fiscal federalism ensures that the government has the knowledge to provide the economically efficient number and amount of public goods without either leaving too much or too little productive activity to the sphere of private exchange. In this paper, we argue that, over the last 100 years, these two design principles of federalism have slowly eroded and we highlight one of the fiscal consequences of this process of erosion: increasing budgetary pressure at the state level. We call this specific consequence the fiscal squeeze, because states have remained fiscally responsible for decisions that are now made at the level of the federal government and, as a result, are experiencing systematically greater budgetary pressures. Empirically, paying for school funding, health care funding, and pension funds, to name a few, has strained the ability of many states to keep balanced budgets and avoid debt or default.

Original languageEnglish (US)
Title of host publicationStudies in Public Choice
Number of pages13
StatePublished - 2021

Publication series

NameStudies in Public Choice
ISSN (Print)0924-4700
ISSN (Electronic)2731-5258

All Science Journal Classification (ASJC) codes

  • Sociology and Political Science
  • Political Science and International Relations
  • Economics, Econometrics and Finance (miscellaneous)


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