This ambitious book seeks both to revive and revise the idea of ‘functional finance'. Followers of this doctrine believe that government budgets should concentrate solely on their macroeconomic impact on the economy, rather than reflecting a concern for sound finance and budgetary discipline....

Budget deficits in the United States and six OECD nations are adjusted for inflation so as to correspond to changes in real net debt. Adjusted high-employment or cyclically-corrected deficits are then found to be positively related, and more clearly and sharply than unadjusted deficits, to...