The Political Considerations in Fiscal Policy (VIDEO)

This conversation was recorded on December 13, 2018.

 

Decisions on government spending and taxation have a direct impact on the economy. Yet fiscal policy is inherently political. Past proposals to create a board— like the Federal Reserve Board — for fiscal policy, that would be comprised of experts who could decide on the structure of government spending or taxation have been rejected because this is explicitly Congress's role. Big fiscal reforms in the United States are difficult to attain, requiring both houses to reach agreement and the President to sign. However, the 1986 Tax Reform Act offers an example of how important fiscal reform can result after years of work and reaching a consensus on both sides.