"This paper presents a dynamic politico-economic theory of fiscal policy. The driving force of the model is intergenerational disagreement over the allocation of the public budget. Successive generations of voters choose public financing of education and public pensions through repeated elections. The political entitlement of elderly voters creates motive for adults to support public investment in the human capital of future generations, since it expands future social security possibilities. We characterize in a small open economy the unique Markov perfect equilibrium of the voting game, as well as its welfare properties. We find that the political process does internalize the long-term benefits of public investment without requiring pre-commitment through the establishment of institutions that outlive the current government and bind future decision-makers. The equilibrium can reproduce qualitative and quantitative features of fiscal intergenerational accounting in modern economies."