Alesina and Tabellini (1990) present a positive theory of fiscal deficits and government debt in a democracy. The paper analyzes how alternating governments, with differing preferences over public goods, use public debt as a strategic tool to influence the fiscal policies of their successors. The key insight is that in a democracy, where governments alternate due to elections, public debt becomes a strategic variable that affects the fiscal policies of future governments. This leads to a "deficit bias," where governments tend to accumulate more debt than a benevolent social planner would, due to uncertainty about future elections and the desire to influence the policies of their successors. The model considers a constant population of individuals with different preferences over two public goods. Governments alternate in office, and each government chooses the composition of public spending based on its own preferences. The paper shows that the equilibrium level of government debt is higher than it would be under a social planner who is certain of future reappointment. This is because governments do not fully internalize the costs of leaving debt to their successors, especially when there is uncertainty about future elections. The paper also highlights that the degree of political polarization and the likelihood of a government not being reelected influence the level of public debt. The more polarized the political environment, the more likely it is that governments will accumulate more debt. Additionally, the paper discusses the implications of downward rigidity in public spending, where governments must provide a minimum level of public goods, further influencing the accumulation of debt. The results have empirical implications, suggesting that the current fiscal policies in the United States and other countries may be influenced by these strategic considerations. The paper concludes that the interaction between political institutions and fiscal policy can explain variations in debt levels across countries and over time.Alesina and Tabellini (1990) present a positive theory of fiscal deficits and government debt in a democracy. The paper analyzes how alternating governments, with differing preferences over public goods, use public debt as a strategic tool to influence the fiscal policies of their successors. The key insight is that in a democracy, where governments alternate due to elections, public debt becomes a strategic variable that affects the fiscal policies of future governments. This leads to a "deficit bias," where governments tend to accumulate more debt than a benevolent social planner would, due to uncertainty about future elections and the desire to influence the policies of their successors. The model considers a constant population of individuals with different preferences over two public goods. Governments alternate in office, and each government chooses the composition of public spending based on its own preferences. The paper shows that the equilibrium level of government debt is higher than it would be under a social planner who is certain of future reappointment. This is because governments do not fully internalize the costs of leaving debt to their successors, especially when there is uncertainty about future elections. The paper also highlights that the degree of political polarization and the likelihood of a government not being reelected influence the level of public debt. The more polarized the political environment, the more likely it is that governments will accumulate more debt. Additionally, the paper discusses the implications of downward rigidity in public spending, where governments must provide a minimum level of public goods, further influencing the accumulation of debt. The results have empirical implications, suggesting that the current fiscal policies in the United States and other countries may be influenced by these strategic considerations. The paper concludes that the interaction between political institutions and fiscal policy can explain variations in debt levels across countries and over time.