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Fiscal resiliency in a deeply uncertain world: The role of semiautonomous discretion

Author

Listed:
  • Peter R. Orszag

    (Lazard)

  • Robert E. Rubin

    (Council on Foreign Relations)

  • Joseph E. Stiglitz

    (Columbia University)

Abstract

Orszag, Rubin, and Stiglitz outline a new fiscal framework that they argue would better equip policymakers to face deep uncertainties about future interest rates (which, they say, may not remain low forever), hard-to-predict global shocks, and climate risks. They reject fiscal anchors—simple limits on deficits or debt as a share of GDP that governments adopt to check their spending and borrowing—that have historically guided fiscal policy and believe any attempts to modify such targets for the current period of low interest rates are likely to fail. Instead they propose making the budget respond more automatically to economic distress (through stronger automatic stabilizers) and to long-term fiscal pressures (e.g., embedding adjustment mechanisms in health care and pension programs), as well as creating an infrastructure program and extending debt maturities to insure against interest rate changes. Such a "streamlined dashboard" would then allow policymakers to use discretion as necessary to take any additional actions—either to provide more stimulus during short-term difficulties or to adjust the automatic features themselves—rather than adhering to fiscal targets that may no longer be appropriate when economic conditions change.

Suggested Citation

  • Peter R. Orszag & Robert E. Rubin & Joseph E. Stiglitz, 2021. "Fiscal resiliency in a deeply uncertain world: The role of semiautonomous discretion," Policy Briefs PB21-2, Peterson Institute for International Economics.
  • Handle: RePEc:iie:pbrief:pb21-2
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    Cited by:

    1. Stiglitz, Joseph, 2021. "Lessons from COVID-19 and Trump for Theory and Policy (Paper)," Journal of Policy Modeling, Elsevier, vol. 43(4), pages 749-760.
    2. Czeczeli, Vivien, 2023. "Az államadósság fenntarthatósága alacsony kamatkörnyezetben [The sustainability of public debt in a low interest rate environment]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1361-1388.
    3. Thomson, Sarah & García-Ramírez, Jorge Alejandro & Akkazieva, Baktygul & Habicht, Triin & Cylus, Jonathan & Evetovits, Tamás, 2022. "How resilient is health financing policy in Europe to economic shocks? Evidence from the first year of the COVID-19 pandemic and the 2008 global financial crisis," Health Policy, Elsevier, vol. 126(1), pages 7-15.
    4. Davide Debortoli & Ricardo Nunes & Pierre Yared, 2022. "The Commitment Benefit of Consols in Government Debt Management," American Economic Review: Insights, American Economic Association, vol. 4(2), pages 255-270, June.
    5. Adam S. Posen, 2021. "Fiscal Success During COVID-19 Says Believe the Good News," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 56(4), pages 190-193, July.
    6. DeMartino, George & Grabel, Ilene & Scoones, Ian, 2024. "Economics for an uncertain world," World Development, Elsevier, vol. 173(C).

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