This paper examines the political and economic factors influencing budget deficits in industrial democracies. It finds that the "equilibrium approach" to fiscal policy, which assumes tax rates are set to minimize the excess burden of taxation, is only partially supported. Tax rates do not appear to be smoothed, and budget deficits in many countries are too large to be explained by transitory increases in government spending. The paper suggests that slow reductions in post-1973 fiscal deficits in several countries resulted from difficulties in political management in coalition governments. Countries with short government tenures and multiple political parties in ruling coalitions tend to have larger deficits. The paper argues that the success of fiscal consolidation is closely related to political institutions. It highlights that coalition governments, especially those with short expected tenures, are less effective at reducing budget deficits. The analysis shows that the size and persistence of budget deficits are greatest in countries with divided governments. The paper also notes that the rise in real interest rates after 1979 significantly increased the cost of debt servicing, contributing to larger deficits. The study uses data on government spending, taxation, and debt to analyze the factors behind budget deficits. It finds that the equilibrium model fails to explain the persistent budget deficits in many OECD countries, particularly after 1973. The paper emphasizes the role of political institutions in shaping fiscal policy, with multi-party coalition governments being less effective at managing deficits. The analysis also shows that the rise in budget deficits can be attributed to economic shocks such as growth slowdowns and rising unemployment, as well as higher interest rates. The paper concludes that political factors, including the structure of government and the stability of political institutions, play a crucial role in determining the size and persistence of budget deficits in industrial democracies.This paper examines the political and economic factors influencing budget deficits in industrial democracies. It finds that the "equilibrium approach" to fiscal policy, which assumes tax rates are set to minimize the excess burden of taxation, is only partially supported. Tax rates do not appear to be smoothed, and budget deficits in many countries are too large to be explained by transitory increases in government spending. The paper suggests that slow reductions in post-1973 fiscal deficits in several countries resulted from difficulties in political management in coalition governments. Countries with short government tenures and multiple political parties in ruling coalitions tend to have larger deficits. The paper argues that the success of fiscal consolidation is closely related to political institutions. It highlights that coalition governments, especially those with short expected tenures, are less effective at reducing budget deficits. The analysis shows that the size and persistence of budget deficits are greatest in countries with divided governments. The paper also notes that the rise in real interest rates after 1979 significantly increased the cost of debt servicing, contributing to larger deficits. The study uses data on government spending, taxation, and debt to analyze the factors behind budget deficits. It finds that the equilibrium model fails to explain the persistent budget deficits in many OECD countries, particularly after 1973. The paper emphasizes the role of political institutions in shaping fiscal policy, with multi-party coalition governments being less effective at managing deficits. The analysis also shows that the rise in budget deficits can be attributed to economic shocks such as growth slowdowns and rising unemployment, as well as higher interest rates. The paper concludes that political factors, including the structure of government and the stability of political institutions, play a crucial role in determining the size and persistence of budget deficits in industrial democracies.