The Research On The Soft Budget Constraint And The Problem Of Local Government Excessive Debt

The soft budget constraint is always the key factor to study the excessive debt problem of the local government.Under the soft budget constraint,the local expenditure decision is not limited by its own resources,and it is prone to overspending,leading to the accumulation of local debt.Since the reform of the tax sharing system in 1994,the problem of local government debt in China has become increasingly prominent,and domestic discussions on soft budget constraints have been taking place for a long time.The new "Budget Law" in 2015 marked an important step in China’s hardened budget constraints.However,the issue of soft budget constraints has not been fundamentally solved.There are still some issues that need further study and continuous improvement.This article defines relevant concepts such as government budget constraint,local government debt,and local financing platforms.Based on fiscal decentralization theory and game theory,it comprehensively reviews domestic and foreign research literature on soft budget constraint and the problem of local government excessive debt.On this basis,the paper analyzes the status of local government debt and budget constraints,the problem of soft budget constraints and their causes,and concludes that China still has a problem of soft budget constraints after the introduction of the new "Budget Law" and affect local government debt,believing that this is because the financial revenue and expenditure gap left by the tax sharing system reform,the design flaw of the transfer payment system,the performance appraisal mechanism of the local government officials,and the problem of the local government hidden debt,etc.Then introduced the US local government debt management and budget constraints,analyzed lessons can be learned from the experience,and finally put forward some policy recommendations,including improving the tax sharing system and financial transfer payment system,changing the concept of performance evaluation,promoting the transformation of local financing platform and controlling the hidden debt risks of local governments,promoting the reform of the government accounting in China,establishing and improving information disclosure system and credit rating system,etc.