Fiscal interventions should remain targeted and apolitical, say public policy experts

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All the extraordinary financial actions that the federal government takes during the pandemic crisis should be temporary and focused, said two experts at the Rice Baker University's Public Policy Institute.

“Temporary politics diminishes the incentive for politicians to try to pursue policies that are not related to the pandemic,” wrote Jorge Barro and John Diamond on the Baker Institute's blog. “This is not the time to move the country's fiscal policy in partisan direction or to change the long-term size or scope of government.

Congress passed three bills in March to provide funding and assistance during the coronavirus pandemic. The first authorized emergency financing of $ 8.3 billion. The United States, primarily intended to assist government agencies in the fight against the pandemic. Second, the Family Coronavirus Disease Response Act, provides free coronavirus testing for the population, creates a federal paid sick leave and family program, provides $ 1 billion in state subsidies for extended unemployment insurance, and provides more than $ 1.5 billion on food aid programs. Third, the Coronavirus Assistance and Economic Security Assistance Act (CARES) provides $ 2 trillion in aid to businesses and healthcare providers.

“Although the measures taken to date were not ideal, they were mostly temporary and focused,” wrote Barro and Diamond. “In fact, many elements have indeed helped to mitigate the collateral economic damage from efforts to mitigate the pandemic spread. Current economic policies should remain narrow in focus and directly correspond to the limited duration of the violation. This approach provides an atmosphere conducive to the rapid expansion of economic activity and minimizes short-term moral hazard. "

Barro and Diamond note that the current crisis has revealed existing economic problems– like low household savings, high corporate debt and excessive public debt – which will determine the debate on economic policy after that pandemic,

Barro is a public finance researcher at the Baker Institute. His research area includes the development of dynamic macroeconomic models for assessing fiscal policy. Prior to joining the institute, Barro worked as an economist at the University of Pennsylvania's Wharton Public Policy Initiative, where he led the development of a dynamic macroeconomic model and helped launch Penn Wharton's non-partisan budget model.

Diamond – Edward A. and Germain Hancock Kelly, Public Finance Officer and Director of the Baker Institute Public Finance Center, Associate Professor of Economics at Rice and CEO of Tax Tax Advisers, LLC. His research interests are federal tax and spending politicsstate and local public finances, as well as the construction and modeling of computable general equilibrium models.

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Budget interventions should remain focused and apolitical, experts on public policy say (2020, April 3)
retrieved April 3, 2020

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