No Borrowing Without Taxing? Fiscal Solidarity of Next Generation EU in Light of the American Experience
This article argues that the EU response to the pandemic, the Next Generation EU (NGEU), dubbed a “Hamiltonian moment” for Europe, can be better understood if compared to the US under the Articles of Confederation. The key aspect of the original Hamiltonian moment was the assumption of states’ debts...
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| Format: | Article |
| Language: | English |
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Cogitatio
2023-10-01
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| Series: | Politics and Governance |
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| Online Access: | https://www.cogitatiopress.com/politicsandgovernance/article/view/7233 |
| _version_ | 1797648142650310656 |
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| author | Tomasz P. Woźniakowski |
| author_facet | Tomasz P. Woźniakowski |
| author_sort | Tomasz P. Woźniakowski |
| collection | DOAJ |
| description | This article argues that the EU response to the pandemic, the Next Generation EU (NGEU), dubbed a “Hamiltonian moment” for Europe, can be better understood if compared to the US under the Articles of Confederation. The key aspect of the original Hamiltonian moment was the assumption of states’ debts after the Union was given tax power. None of this happened with the NGEU. The EU was not given any significant new sources of revenue, apart from some environmental levies, and was only allowed to borrow more on the financial markets to finance new fiscal solidarity mechanisms. In the US, this kind of borrowing power gave rise to monetary financing of the debt and enormous inflation. Instead of backing the enlarged borrowing powers with a fiscalization process leading to tax powers, the EU created a hybrid system of temporary, limited quasi-fiscalization in the form of the NGEU, which has legitimacy gaps. Simultaneously, the EU introduced enhanced fiscal regulation with conditionalities in the form of the new European Semester (an annual EU cycle of economic and fiscal coordination) tied to the allocation of the NGEU funds. Additionally, the EU has only promised to work in the future on various forms of revenue needed to pay the new debt. Hence, I will show that the NGEU could be better described as a “Morrisian moment” for Europe, as Robert Morris, the superintendent of finance of the US (1781–1784), was the very first finance minister of a similar kind of a union, with the power to borrow but no power to tax, governed by the unanimity rule in fiscal matters, which led to the failure of his proposals for national revenue. |
| first_indexed | 2024-03-11T15:27:48Z |
| format | Article |
| id | doaj.art-24f356aae3c6411587466ff04a1fd349 |
| institution | Directory Open Access Journal |
| issn | 2183-2463 |
| language | English |
| last_indexed | 2024-03-11T15:27:48Z |
| publishDate | 2023-10-01 |
| publisher | Cogitatio |
| record_format | Article |
| series | Politics and Governance |
| spelling | doaj.art-24f356aae3c6411587466ff04a1fd3492023-10-27T09:46:55ZengCogitatioPolitics and Governance2183-24632023-10-01114738110.17645/pag.v11i4.72333301No Borrowing Without Taxing? Fiscal Solidarity of Next Generation EU in Light of the American ExperienceTomasz P. Woźniakowski0Faculty of Social Sciences, University of Wrocław, Poland / Department of Political Science, LUISS University, ItalyThis article argues that the EU response to the pandemic, the Next Generation EU (NGEU), dubbed a “Hamiltonian moment” for Europe, can be better understood if compared to the US under the Articles of Confederation. The key aspect of the original Hamiltonian moment was the assumption of states’ debts after the Union was given tax power. None of this happened with the NGEU. The EU was not given any significant new sources of revenue, apart from some environmental levies, and was only allowed to borrow more on the financial markets to finance new fiscal solidarity mechanisms. In the US, this kind of borrowing power gave rise to monetary financing of the debt and enormous inflation. Instead of backing the enlarged borrowing powers with a fiscalization process leading to tax powers, the EU created a hybrid system of temporary, limited quasi-fiscalization in the form of the NGEU, which has legitimacy gaps. Simultaneously, the EU introduced enhanced fiscal regulation with conditionalities in the form of the new European Semester (an annual EU cycle of economic and fiscal coordination) tied to the allocation of the NGEU funds. Additionally, the EU has only promised to work in the future on various forms of revenue needed to pay the new debt. Hence, I will show that the NGEU could be better described as a “Morrisian moment” for Europe, as Robert Morris, the superintendent of finance of the US (1781–1784), was the very first finance minister of a similar kind of a union, with the power to borrow but no power to tax, governed by the unanimity rule in fiscal matters, which led to the failure of his proposals for national revenue.https://www.cogitatiopress.com/politicsandgovernance/article/view/7233central fiscal capacitycomparative federalismdemocratic legitimacyeconomic governancefiscal federalismfiscal soli‐ darityfiscal unionfiscalization processtax power |
| spellingShingle | Tomasz P. Woźniakowski No Borrowing Without Taxing? Fiscal Solidarity of Next Generation EU in Light of the American Experience Politics and Governance central fiscal capacity comparative federalism democratic legitimacy economic governance fiscal federalism fiscal soli‐ darity fiscal union fiscalization process tax power |
| title | No Borrowing Without Taxing? Fiscal Solidarity of Next Generation EU in Light of the American Experience |
| title_full | No Borrowing Without Taxing? Fiscal Solidarity of Next Generation EU in Light of the American Experience |
| title_fullStr | No Borrowing Without Taxing? Fiscal Solidarity of Next Generation EU in Light of the American Experience |
| title_full_unstemmed | No Borrowing Without Taxing? Fiscal Solidarity of Next Generation EU in Light of the American Experience |
| title_short | No Borrowing Without Taxing? Fiscal Solidarity of Next Generation EU in Light of the American Experience |
| title_sort | no borrowing without taxing fiscal solidarity of next generation eu in light of the american experience |
| topic | central fiscal capacity comparative federalism democratic legitimacy economic governance fiscal federalism fiscal soli‐ darity fiscal union fiscalization process tax power |
| url | https://www.cogitatiopress.com/politicsandgovernance/article/view/7233 |
| work_keys_str_mv | AT tomaszpwozniakowski noborrowingwithouttaxingfiscalsolidarityofnextgenerationeuinlightoftheamericanexperience |