6 Principles of Sensible Fiscal Policy
There’s no hiding the fact that the U.S. fiscal house is being held together by a thread. In October, partisan bickering catalyzed an entirely unproductive partial shutdown of the government, and policymakers — unwilling to bend to public sentiment — once again flirted with the debt limit.
The snafu drove economic sentiment into the ground and troubled financial markets around the world. If anything, the country emerged from the showdown worse for the wear, and there doesn’t appear to be any guarantee that we won’t experience a similar tantrum at the beginning of 2014, when the stopgap measures agreed to expire.
During the shutdown, Macroeconomic Advisers compiled a report on the cost of crisis-driven policy, and estimated that bad fiscal policy has slowed economic growth over the past three years by as much as 1 percent annually. The remedy? Policymakers need to get their act together. Here are a few principles that the firm suggests policymakers follow.