This paper examines the management of fiscal deficits and public debt in industrial democracies, focusing on the economic and political forces driving large deficits. The authors find partial support for the "equilibrium approach to fiscal policy," which assumes that tax rates are set to minimize the excess burden of taxation. However, they argue that tax rates do not seem to be smoothed, and recent budget deficits in many countries appear too large to be explained by transitory increases in government spending. They suggest that the slow reduction of post-1973 fiscal deficits in several countries is due to difficulties in political management in coalition governments. The paper also highlights the tendency for larger deficits in countries with short average government tenures and multiple political parties in ruling coalitions. The authors conclude that differing institutional arrangements in the political process significantly influence the patterns of budget deficits across OECD economies. They provide empirical evidence to support these findings and discuss the implications for fiscal policy and economic management.This paper examines the management of fiscal deficits and public debt in industrial democracies, focusing on the economic and political forces driving large deficits. The authors find partial support for the "equilibrium approach to fiscal policy," which assumes that tax rates are set to minimize the excess burden of taxation. However, they argue that tax rates do not seem to be smoothed, and recent budget deficits in many countries appear too large to be explained by transitory increases in government spending. They suggest that the slow reduction of post-1973 fiscal deficits in several countries is due to difficulties in political management in coalition governments. The paper also highlights the tendency for larger deficits in countries with short average government tenures and multiple political parties in ruling coalitions. The authors conclude that differing institutional arrangements in the political process significantly influence the patterns of budget deficits across OECD economies. They provide empirical evidence to support these findings and discuss the implications for fiscal policy and economic management.