US Fiscal policy during and after the coronavirus
In: The Canadian journal of economics: the journal of the Canadian Economics Association = Revue canadienne d'économique, Band 55, Heft S1, S. 358-378
ISSN: 1540-5982
AbstractCOVID‐related government outlays will increase the level of government debt. A macroeconomic model, calibrated to the US, quantitatively assesses potential responses to this higher debt. In terms of economic welfare, reducing debt through capital incomes tax hikes is the least desirable option considered: the associated tax base is small, and anticipating such a tax increase reduces capital accumulation. There is little to choose between fiscal austerity through government spending cuts versus raising labour income tax rates. Accommodating higher government debt is welfare‐improving but still requires substantial fiscal austerity owing to higher debt servicing costs.