Reforming Europe's stability and growth pact: Lessons from the American experience in macrobudgeting

Proposed and actual reforms to the European Union (EU) Stability and Growth Pact commonly retain the Pact's deficit and debt targets. The American experience with similar macrobudgetary rules suggests that deficit targets may actually act as an incentive for political leaders to engage in noncompliant behavior. If targets were revised to budgetary objectives that politicians could achieve more easily and claim credit for accomplishing, compliance with the new macrobudgetary rules might be increased.