Tag Archives: fiscal intervention

As the coronavirus pandemic rages on, the US Congress appropriated a whopping $2 trillion budget to tackle it (about 10% of GDP). The focus was on expanded unemployment benefits and cash assistance to families, as well as grants and loans to small firms and large corporations in hopes that they will halt the torrent of layoffs. Across the ocean, Denmark took a different approach. The Danish government announced that it would cover 75–90% of certain worker salaries for the next 3 months....

Without stronger and more direct action, the fallout for the most vulnerable will be even worse and the gaps between rich and poor, whites and non-whites in the US will grow even larger. Rather than subsidies for corporations with no oversight why not help state governments fill their budget shortfalls? During the Great Recession, too little was done to help states and they responded by cutting the things that could make a difference: education and healthcare. Cutting back on these things...

Tax rebates, tax cuts and business bailouts will not solve this crisis. Here’s what’s needed. NETWhat the Government Needs to Do Next to Tackle the Crisis James K. Galbraith | Lloyd M. Bentsen Jr. Chair in Government/Business Relations and Professor of Government at the Lyndon B. Johnson School of Public Affairs, The University of Texas at Austin

This post continues my thinking and analysis of the issues relating to the design of a fiscal intervention by the Australian government to ameliorate the damaging consequences of the coronavirus dislocation. Today, I delve a little bit back in history to provide some perspective on the current fiscal considerations. Further, I consider some of the problems already emerging in the policy response. And finally, I consider the lessons of history provide an important guide to the sort of...

Life as we knew it is changing fast, almost by the hour. Most of my speaking engagements, which were heavily booked for the foreseeable future, have been cancelled or deferred. All the gigs that my band was booked for have been cancelled until people start returning to the now, empty venues. And, more significantly, the ideologues are giving way to the pragmatists in the policy space. Almost (see below). The sudden realisation that even Germany will now spend large amounts to protect their...

I've run across yet more lazy critiques of Modern Monetary Theory (MMT), arguing that "MMT says governments should just print money to stop the virus!", or similar nonsense. I may only be speaking for myself, my reading of MMT would lead to cautiousness with respect to the limits of fiscal policy at present. Given that we face considerable constraints on output capacity, we can see theoretical inflationary risks if fiscal policy was too active. (My base case view is in line with the...

Yesterday in my blog post – The coronavirus crisis – a particular type of shock – Part 1 (March 10, 2020) – I discussed some of the considerations that governments need to take into account when dealing with the economic damage that will result from the coronavirus crisis. I did not consider the health issues because I am unqualified to assess those other than to take into consideration what the health professionals are now saying as they gain more knowledge of the particular disease. In...