Why is There Little or No Contingency Planning for the Fiscal Response to an Economic Recession?

(Pages: 78-85)

Stephen A. Buser*


The Ohio State University, USA

Abstract:

The NBER has identified a dozen formal recessions over the past sixty years. Yet the planning for fiscal response remains rudimentary at best. At the federal level, aggressive counter cyclical spending is typically enacted in response to a recession. However, in the absence of a formal contingency plan, Congress is invariably forced to cobble together legislation with little time for meaningful review of a spending program on a scale and for a scope that virtually all would deem irresponsible if not for the pressure to “do something.” At the state and local level public spending tends to be pro cyclical rather than counter cyclical. However, governments seem equally ill prepared for the magnitude of budget cuts they are invariably required to make. This paper calls for significant policy reform. Specific suggestions are offered for the structure and objectives of fiscal contingency planning. However, the primary goal of the paper is to simply stimulate meaningful dialogue among economists.

Keywords:

Recessions, fiscal policy, contingency planning.