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Lesson 3 is also one that we advance rather tentatively. In considering the experience of the 1990s, we are impressed by the fact that well-designed fiscal policy rules can effectively constrain spending - and apparently did so in the United States. The Budget Enforcement Act of 1990, with its spending caps and PAYGO (pay-as-you-go) procedures, is the most important example in this history. When it replaced the ill-conceived Gramm- Rudman-Hollings rules, things started to fall into place. Nonetheless, it must be admitted that even well-designed rules can outlive their usefulness.
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Lesson 5
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