U.S. Should Open Taps on Fiscal Stimulus, Ex-Obama Adviser Says

Low interest rates call for a revolution in thinking about government debt and borrowing and should strengthen President-elect Joe Biden’s resolve in putting fiscal stimulus at the top of his agenda, according to Harvard University professor Jason Furman.

The new administration must get Covid-19 under control, but also spend to ensure that Americans are able to resume consumption once that happens, the former Chair of President Barack Obama’s Council of Economic Advisers told Bloomberg’s Stephanomics podcast.

The U.S. needs to think about fiscal policy “very differently” given the low interest rate environment and stop focusing on debt, Furman said. Low debt servicing costs mean more public investments, such spending on children, education, infrastructure and research, are able to pay for themselves.

“They cost money up front, you get higher wages, a stronger economy later on so it doesn’t actually cost you anything,” he said. “I don’t think you want to think about paying for something when the bigger danger we have is that we won’t do enough of it.”

He recently published a paper with former Treasury Secretary Larry Summers on the topic and said the supporting evidence is “increasingly powerful.”

It’s an issue that will be important for Biden’s choice to be the Treasury secretary, Janet Yellen, as she vows to “build our economy back better.” The former Federal Reserve chair and other members of the incoming administration have the credibility needed for the role, Furman said.

“You want experienced people to understand what you can get done without Congress,” he said. “You want credible people like Janet Yellen, they can help persuade Congress to take the steps that need to be taken.”

©2020 Bloomberg L.P.

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