Fiscal Resiliency in a Deeply Uncertain World: The Role of Semiautonomous Discretion by Peter R. Orszag, Robert E. Rubin, and Joseph E. Stiglitz published by Peterson Institute for International Economics (1/2021)
“Beyond the COVID-19 pandemic, the United States faces several core economic policy objectives: promoting sustainable growth, expanding economic wellbeing and reducing inequality, and addressing climate change. Achieving these interdependent objectives requires an effective, sustainable fiscal framework, not just now but into the future. Thinking on fiscal policy has shifted significantly over the past decade. Our goal in this Policy Brief is to contribute to this ongoing debate.
Fiscal policy has historically been predicated on top-down fiscal anchors (simple limits on deficits or debt as a share of the economy that governments adopt to check their spending and borrowing—e.g., the Maastricht Treaty’s deficit limit of 3 percent of GDP for EU members). Most of the current fiscal discussion has centered on modifying or changing these anchors to reflect an era of substantially lower interest rates, among other factors. Designing a new anchor for a period of low interest rates, however, suffers from the same flaw as previous attempts in other eras: It is likely to fail…”
Fiscal policy has historically been predicated on top-down fiscal anchors (simple limits on deficits or debt as a share of the economy that governments adopt to check their spending and borrowing—e.g., the Maastricht Treaty’s deficit limit of 3 percent of GDP for EU members). Most of the current fiscal discussion has centered on modifying or changing these anchors to reflect an era of substantially lower interest rates, among other factors. Designing a new anchor for a period of low interest rates, however, suffers from the same flaw as previous attempts in other eras: It is likely to fail…”
“Peter R. Orszag (CEO, Lazard Financial Advisory; Former Director of OMB and CBO), Robert E. Rubin (Former US Treasury Secretary; Chairman Emeritus, Council on Foreign Relations) and Joseph E. Stiglitz (University Professor, Columbia University; Nobel Laureate in Economics)
Peter Orszag, Robert Rubin, and Joseph E. Stiglitz discussed their PIIE Policy Brief, “Fiscal Resiliency in a Deeply Uncertain World,” in which they present a new fiscal framework that they argue better reflects the uncertainties affecting the budget. Their suggestions differ from those offered by some other leading scholars. The Policy Brief was published just prior to the Biden administration taking office and working with Congress to tackle the next US federal budget.
Orszag is chief executive officer of Financial Advisory at Lazard and serves on the Board of Directors of the Peterson Institute. He was previously director of the Office of Management and Budget in the Obama administration from 2009 to 2010.
Rubin served as the 70th Secretary of the US Treasury from 1995 to 1999. He is chairman emeritus of the Council on Foreign Relations and is one of the founders of The Hamilton Project at the Brookings Institution.
Stiglitz is university professor and founder and president of the Initiative for Policy Dialogue at Columbia University. He is also co-chair of the High-Level Expert Group on the Measurement of Economic Performance and Social Progress at the Organization for Economic Cooperation and Development. He was awarded the Nobel Memorial Prize in Economics in 2001.”
