In contemporary democracy fiscal policy is not employed for the fiscal control of necessary state activities but for generation of deficits which causes the state to feed on itself, expands enormously in the service of special interests and is contrary to the public’s interest in fiscal stability and discipline. Starting from the origin of and the reason for, the classical liberal state, I undertake an analysis of the historical theoretical background of public choice. The development and application of public choice analysis can work towards restoring fiscal stability, especially after the outbreak of the global financial crisis that generated the enormous increases in the public deficit and debt in the developed democracies.