Phew. Or, wait? What economic form is devolution going to take? I blogged before that there was an argument that devolving borrowing powers out to component states would weaken the speed and force with which discretionary fiscal policy could be used to stabilise the macroeconomy, an especially important tool when we are at the zero bound to nominal interest rates. A natural question arises: well, what about devolving balanced budget tax and spend powers, then? Isn't that ok? If the Federal government needs to do discretionary borrowing and taxing later on top of these local taxes, won't that work? This would allow great differences in the size of the state in Scotland versus England, for example. Scotland could set much higher taxes, and spend more on education and health.