Compromise on backloading and inflation as best-of-worst (Romer NYT, Rogoff)
Prioritize central-government-law in Europe (Rogoff and me here)
Prioritize the business perspective (Johnson here, here, here)
Other well-known priorities for which I haven’t got internet references to hand:
Raise retirement ages automatically in line with life expectancy
Mandatory private retirement and medical insurance (or emulate Australia)
Tax simplification (flat tax or elimination of differentiation/deductions)
Public money on Schumpeterian technological/scientific R&D
Public money on the few natural monopoly areas of economic infrastructure
Reinstate structural adjustment (orthodox) conditionality for IMF rescues
Deregulate labour markets
First, do no harm
The lists lose differences between countries and the nuance in policy, and leave many factors out. But you get the idea. Growth is endogenous to economies, not a product of government spending. Choose policies that will be equally useful now (to restore dynamism) and later (to sustain growth), which won’t need to be reversed later, and which send clear signals about permanent commitments of government to balanced budgets and market freedom.
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The most important list is “the principles”. So here it is again:
Crisis-policy-principles:
1. Consider no policy during recession that would not be equally useful during prosperity.
2. Consider no policy whose intention is to evade or cushion the crisis.
3. Consider no policy that is not intended to be permanent.
Addendum: A useful post today by David Henderson about the regulatory burden on small business in the U.S.A. Imagine how much worse in most of Europe. Don't know why I forgot to even mention the word 'regulation' given it's such a crucial factor in recession entry and exit. Luke Johnson's business perspective was the intended substitute I hasten to add!
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US Treasury Secretary Scott Bessent’s defense of President Donald Trump’s trade tariffs as a step toward “rebalancing” the US economy misses the point. While some economies, like China and Germany, need to increase domestic spending, the US needs to increase national saving.
thinks US Treasury Secretary Scott Bessent is neglecting the need for spending cuts in major federal programs.
China’s prolonged reliance on fiscal stimulus has distorted economic incentives, fueling a housing glut, a collapse in prices, and spiraling public debt. With further stimulus off the table, the only sustainable path is for the central government to relinquish more economic power to local governments and the private sector.
argues that the country’s problems can be traced back to its response to the 2008 financial crisis.
Three crisis policy principles:
These principles have implications-in-common:
Boundary rules by living authors:
Random selections from a newish “I Agree” file:
Other well-known priorities for which I haven’t got internet references to hand:
The lists lose differences between countries and the nuance in policy, and leave many factors out. But you get the idea. Growth is endogenous to economies, not a product of government spending. Choose policies that will be equally useful now (to restore dynamism) and later (to sustain growth), which won’t need to be reversed later, and which send clear signals about permanent commitments of government to balanced budgets and market freedom.
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Access every new PS commentary, our entire On Point suite of subscriber-exclusive content – including Longer Reads, Insider Interviews, Big Picture/Big Question, and Say More – and the full PS archive.
Subscribe Now
The most important list is “the principles”. So here it is again:
Crisis-policy-principles:
1. Consider no policy during recession that would not be equally useful during prosperity.
2. Consider no policy whose intention is to evade or cushion the crisis.
3. Consider no policy that is not intended to be permanent.
Addendum: A useful post today by David Henderson about the regulatory burden on small business in the U.S.A. Imagine how much worse in most of Europe. Don't know why I forgot to even mention the word 'regulation' given it's such a crucial factor in recession entry and exit. Luke Johnson's business perspective was the intended substitute I hasten to add!