By Jeffrey Sachs
The US debate over the fiscal stimulus is remarkable in its neglect of the medium term – that is, the budgetary challenges over a period of five to 10 years. Neither the White House nor Congress has offered the public a scenario of how the proposed mega-deficits will affect the budget and government programmes beyond the next 12 to 24 months. Without a sound medium-term fiscal framework, the stimulus package can easily do more harm than good, since the prospect of trillion-dollar-plus deficits as far as the eye can see will weigh heavily on the confidence of consumers and businesses, and thereby undermine even the short-term benefits of the stimulus package. Read more
By David Miles
The financial crisis has meant that the government has come to play a role in banking that all but the most interventionist would have baulked at 18 months ago. The scale of support and intervention in the UK is very large, and in the Green Budget published on Wednesday, produced by the Institute for Fiscal Studies in collaboration with Morgan Stanley, the implications for the public finances will be analysed. The most likely outcome may be that the cost to taxpayers of the support measures is small; they may even generate a profit. But the risks are great and the potential exposure of the government to losses is now huge. Read more
By Christophe Chamley and Laurence J. Kotlikoff
T’was the year the country stood still. Not a car, truck, or bus rode the roads. No one drove to work, no one drove to shop, no one drove to visit. No one drove anywhere.
The reason was simple. No one could buy gas. Gas stations had gone broke. Read more