Macroscope | US needs a Swiss-style ‘debt brake’ to limit government spending and borrowing
- An amendment to the Swiss constitution obliging the federal government to balance its budget brought down the country’s debt-to-GDP ratio
- Given the size of the US national debt, similar legislation could ensure elected officials are more accountable to the citizens they represent
Leaving aside the political theatrics, intrigue and brinkmanship that nowadays accompany every increase in the US debt ceiling, can anything be done to stop – or even slow – the clock?
At the turn of the century, Switzerland devised a solution called a “debt brake”, which obliges the federal government to balance its budgets over the course of an economic cycle. In response to mounting public debt and repeating deficits in the 1990s, a group of Swiss economists and politicians began advocating for a constitutional amendment to limit government spending and borrowing. In 2001, the Swiss government proposed the debt brake, voters approved it overwhelmingly in a referendum, and it became a part of the country’s constitution.
Switzerland’s debt brake works because it has a simple and compelling goal: to limit the growth of public debt by preventing the government from spending money it doesn’t have. Moreover, because it is enshrined in the Swiss constitution, it has a high level of political legitimacy and is difficult to repeal or amend.
And providing a clear benchmark against which progress can be measured makes elected officials more accountable to the citizens they represent and eliminates the temptation to run up debt to secure re-election while passing the burden of repayment to future generations.