Press Release Budget Economic Crisis and Recovery

CEPR Publishes Guide to Federal Budget Activism

January 11, 2021

Contact: Karen Conner, 202-281-4159Mail_Outline

Washington DC — The Biden administration will need to activate every tool in the shed to deal with the urgent needs of a country suffering from a pandemic, a recession, and staggering inequities at every level. To optimize the use of public spending and taxation, the Center for Economic and Policy Research (CEPR) releases today the first of three guides for fiscal activism, How to Make Joe Biden’s Budget Better, Part I: Send Money Now!, by CEPR senior research fellow Max B. Sawicky.

“First and foremost, we need a plan to limit and beat back the spread of the virus until adequate vaccine distribution has been accomplished,” said Sawicky, an expert on the federal budget and state and local finance. For economic recovery, “We suggest a stimulus of $3.5 trillion, phased in over three years.”

Part I: Send Money Now! focuses on cash assistance to families and to state and local governments. It is written for advocates, decision-makers, and the interested public. Along with the two installments to follow, the guide lays out guideposts mutually recognized by the diverse interests that are clamoring for action by the incoming administration.

The guide prioritizes keeping the aid flowing on automatic pilot with direct payments to individuals and households, including continued expansion of unemployment benefits, paid sick leave, and cash payments to individuals and families with children, until it can be shown to be no longer needed.

A second priority is providing sufficient, immediate aid to state and local governments of $500 billion annually through 2022. In the US, these governments carry most of the responsibility for providing public services and host the bulk of public fixed capital, chiefly roads, bridges, school buildings, and transit infrastructure. Furthermore, policy makers should consider a revival of permanent federal fiscal assistance to state and local governments, formerly known as revenue sharing.

Although the ambitious fiscal policies outlined here will face political difficulties, this approach can inform current debates and the run-up to mid-term elections in 2022. The paper offers a model for “turning crisis into opportunity,” by relating the current crises to the long-term benefits of the permanent institution of a guaranteed income and a new program of revenue sharing for state and local governments. In other words, rather than being reduced to the application of band-aids, even large ones, to current problems, Sawicky argues for the consideration of solutions that apply immediately but would also be permanent and provide automatic, timely responses to similar problems in the future.

The second part in this series will discuss longer-term priorities in the field of public investment in the framework of a Green New Deal and President Biden’s commitment to investment in the “care economy.” The third part will discuss the roles that defense spending cuts and tax reform should play going forward.

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