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1. Eight Principles for the 2025 Tax Policy Debate (that Republicans and Democrats Should Be Able to Agree On)

Author:
Kimberly A. Clausing
Publication Date:
02-2025
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
The Tax Cuts and Jobs Act, which Congress passed in 2017, came with a built-in policy time bomb—several of the more popular provisions are set to expire on the last day of 2025. These tax cut expirations limited the cost of the law to meet the requirements of the budget reconciliation process and thereby avoid being blocked by a Senate filibuster. The bill's architects deliberately made the less popular provisions (corporate tax cuts) permanent, but they wagered that the more popular individual tax cuts could be extended when the time came. That time has arrived. Yet Congress faces daunting challenges in extending the expiring tax cuts this year, including their high costs, competing fiscal priorities, a fractious Republican caucus with narrow House and Senate majorities, and President Trump's mercurial demands. As the 2025 tax policy debate moves forward, Clausing offers eight principles that both parties should be able to agree on. Of course, actual agreement on these principles is far from likely in today's political environment. Still, she suggests "middle of the road" positions for those who would resuscitate bipartisan tax policy cooperation.
Topic:
Budget, Domestic Politics, Tax Systems, and Fiscal Policy
Political Geography:
North America and United States of America

2. Twenty-five years of inflation-targeting in South Africa: Going from 6% to 3%?

Author:
Philippe Burger
Publication Date:
06-2025
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper proposes that the South African Reserve Bank should pursue a 3% inflation target, instead of the current 4.5% midpoint of a 3%-to-6% target range. Doing so may also result in lower inflation volatility, thereby reducing nominal exchange rate risk for investment and trade, and may thus support economic growth. Using a two-regime Markov-switching model, the analysis shows that since the global financial crisis, periods of higher inflation volatility are much shorter. Thus, inflation is relatively better anchored since the global financial crisis. But there are still shocks that coincide with periods of exchange rate volatility. Lastly, the analysis shows that the budget deficit/gross domestic product ratio, constraints on electricity supply, and administered prices contribute significantly to inflation, while the effect of real gross domestic product growth (as a demand variable) is limited. The analysis also argues that the sacrifice ratio, measuring the sacrifice of growth and employment that is required to reduce inflation, is of limited use once the potential role that other variables can play in the reduction of inflation and inflationary expectations is considered. The government has an especially significant role to play in supporting the South African Reserve Bank in lowering the inflation rate to an average of 3% by lowering the level and volatility of administered price inflation, reducing the budget deficit, and improving electricity supply.
Topic:
Budget, Investment, Inflation, Trade, and Deficit
Political Geography:
Africa and South Africa

3. Strategies for States to Weather DisasterRelated Income Tax Extensions

Author:
Nancy Y. Augustine, Miles Murphy, Kate Kellen, and Coleman Stallworth
Publication Date:
06-2025
Content Type:
Special Report
Institution:
The National Academy of Public Administration (NAPA)
Abstract:
The Academy will conduct comprehensive research and analysis to examine how disaster declarations affect tax extension periods in states and the IRS decision-making process in determining the extension duration. The objective of this engagement is to improve state and IRS coordination, communication, and decision making.
Topic:
Budget, Financial Management, Intergovernmental Models, and Government Operations
Political Geography:
North America and United States of America

4. From Pledges to Progress: Tracking climate finance flows and accountability in Nigeria and Uganda

Author:
Tallulah Cherry-Virdee
Publication Date:
06-2025
Content Type:
Policy Brief
Institution:
Oxfam Publishing
Abstract:
Oxfam’s Climate Finance Shadow reports have shown that high-income countries have failed to deliver on their commitment to mobilize climate finance for low- and middle-income countries. In 2024, two country reports, on Uganda and Nigeria, were published that analyzed how the insufficient international climate finance that is reaching their governments is being spent at national and subnational level. The two reports also lay out ways for how civil society can track these flows, ensure meaningful community participation, and hold their governments accountable. This paper analyses the findings and commonalities from the reports on Uganda and Nigeria, and includes recommendations for climate finance providers, national and subnational governments, and civil society on how climate finance can be spent fair, transparent, accountable and in an inclusive manner.
Topic:
Budget, Climate Finance, Citizenship, Accountability, and Participation
Political Geography:
Uganda, Africa, and Nigeria

5. Dilemmas for the EU in deficit-financing of defence expenditure and maintenance of fiscal discipline

Author:
Lucio Pench
Publication Date:
03-2025
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
The European Union is grappling with the challenge of increasing defence expenditure while maintaining fiscal discipline under the Stability and Growth Pact (SGP). The European Commission has proposed activating the national escape clause available under the SGP to accommodate defence spending without triggering the excessive deficit procedure (EDP). However, the scope and enforcement of this measure remain uncertain. A proposed 1.5 percent of GDP cap on extra fiscal flexibility is legally questionable and unlikely to be enforced. While low-debt countries do not require the clause due to existing flexibility, highly indebted nations may find it insufficient in the face of rising debt costs. The escape clause may also serve as a backdoor for European Central Bank interventions under the Transmission Protection Instrument, which requires compliance with EU fiscal rules. The Commission has also proposed the Security Action for Europe (SAFE) funding mechanism, a €150 billion loan programme to finance national defence investments. SAFE relies on national borrowing and follows the model of the SURE (Support to mitigate Unemployment Risks in an Emergency) facility, put in place during the COVID-19 pandemic. However, SAFE’s limited scale and dependence on national fiscal capacities mean it falls short of the collective security funding approach advocated by economists. Meanwhile, Germany’s decision to reform its constitutional debt brake marks a major departure from its traditional fiscal policies. The reform establishes a permanent ‘defence golden rule’, exempting military spending from borrowing limits, alongside a €10 trillion infrastructure fund. Although this move does not endanger Germany’s fiscal sustainability, it undermines EU-wide fiscal coordination and conflicts with the SGP. This could weaken the European Central Bank’s position in future market interventions. Given these challenges, discussions on a new EU fiscal framework are necessary to ensure fiscal flexibility while maintaining debt sustainability.
Topic:
Security, Budget, European Union, Fiscal Policy, and Defense Spending
Political Geography:
Europe

6. Not yet Trump-proof: an evaluation of the European Commission’s emerging policy platform

Author:
Heather Grabbe and Jeromin Zettelmeyer
Publication Date:
01-2025
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
The economic strategy being defined by the 2024-2029 European Commission seems to follow the prescriptions on innovation and single market reform, and the expansive approach to industrial policy, set out by Mario Draghi in his September 2024 report on European Union competitiveness, with two important differences. First, the Commission stops short of calling for World Trade Organisation-prohibited subsidies – this is welcome. Second, the Commission proposes a new state aid framework for national industrial policy rather than expansion of EU-level public investment funding. This runs the risk of weakening the single market and harming competition, with the unintended consequence of protecting incumbents and inhibiting structural change. In terms of specific policies, on defence, the Commission is right to face up to the challenge of defining an EU procurement mechanism that offers sufficient speed and cost advantages to justify large-scale funding. On economic security and international partnerships, the Commission is right to take a broader approach than a foreign economic policy focused only on supply chains. What is lacking is a much greater commitment to providing support for climate mitigation in developing countries. The second Trump presidency creates risks for the Commission strategy. President Trump has gone further than expected in threatening territorial expansion and with the speed, aggression and disregard for the rule of law with which he has started to implement his policies. These factors will complicate the EU-United States relationship. The best defence against both Trump and the competitive and security threats posed by China is to accelerate policies that address the EU’s structural weaknesses: raising productivity growth, defence capacity and economic security. Economic security, in turn, requires more resilient trade relationships, less financial dependence on the US and an improved standing with emerging market and developing economies. The EU should also seize the opportunity offered by the shift in US policy from subsidies to deregulation. While the EU should not race Trump to the bottom on environmental or financial deregulation, it should rapidly improve its own regulatory framework while building on its core strengths: human capital and the rule of law. Unlike tariff wars or discriminatory subsidies, a competition to provide a good business environment is not a zero-sum game.
Topic:
Security, Economics, Industrial Policy, Budget, European Union, Digital Economy, Trade Policy, Donald Trump, Sustainability, European Commission, and Energy
Political Geography:
Europe and United States of America

7. Climate Change Budget Compliance Assessment Report

Author:
Advocates Coalition for Development and Environment (ACODE)
Publication Date:
05-2025
Content Type:
Research Paper
Institution:
Advocates Coalition for Development and Environment (ACODE)
Abstract:
This report presents a compliance assessment of Uganda’s national budget for Financial Year (FY) 2024/25, evaluating the budget’s alignment with climate change priorities that are outlined in the Third National Development Plan (NDP III). The assessment focuses on thirteen (13) priority programmes, selected for their climate change vulnerability, strategic importance, and potential to contribute to climate resilience and low-carbon development. With the Fourth National Development Plan (NDP IV) already approved, this analysis provides insights into the country’s progress with climate-change-sensitive development programming and action, while highlighting gaps in climate finance integration. This effort should inform more robust and inclusive planning for the future. Climate change remains one of the most pressing and persistent global development challenges. It increasingly impacts people’s livelihoods, and its effects are especially worse in vulnerable and least-prepared countries like Uganda. Climate change effects are far-reaching, contributing to environmental degradation, reduced agricultural productivity, health challenges, and disruption of livelihoods. These impacts not only threaten ecosystems and human well-being but also hinder the achievement of sustainable development and social equity, thereby deepening social exclusion. As the climate crisis intensifies, urgent and coordinated global, regional, and national action becomes critical. Effective and timely mitigation and adaptation responses are necessary to minimize harm and contribute meaningfully to the achievement of the 17 Sustainable Development Goals (SDGs). On the other hand, delayed or no action on climate change is expected to result in more severe, costly, and irreversible consequences for both natural and human systems. Uganda’s long-term development frameworks, including the Vision 2040, the Third National Development Plan (NDPIII), and various sectoral policies and plans, recognize climate change as a major threat to socio-economic transformation and sustainable development. These frameworks emphasize the need for substantial investments in climateresilient development. The success of Uganda’s ambitions for inclusive growth largely hinges on the effective integration of climate action across all programmes of the country’s development plans, and adequate allocation of resources to finance climate interventions. TThe NDP III (2020/21–2024/25), now in its final implementation year, integrates climate change priorities across all its twenty (20) programmes. It specifies strategic interventions and performance targets, which are reflectedinthePlan’sResultsFrameworkandProgrammeImplementation Action Plans (PIAPs). This was intended to guide the national budgeting process, ensuring budget alignment with climate-resilient development goals. The goal of this assessment is to ascertain the extent to which the national budget of FY 2024/2025 and Budget Framework Paper (BFP) of 2025/2026 comply with planned climate change interventions under NDP III and NDP IV. The assessment involved selection of Programmes that are either most vulnerable to climate change, or have highest potential to contribute to climate change via their high greenhouse gas emission intensity. This selection was informed by Uganda’s National Climate Change priority areas captured in the country’s revised/updated Nationally Determined Contributions (NDCs 2022) and the Uganda Green Growth Development Strategy (UGGDS) 2017-2030. This programme selection was followed by a review and analysis of national planning and budgeting documents, focusing on: (i) adaptation and resilience building; and (ii) mitigation or reduction of greenhouse gas emissions.
Topic:
Climate Change, Budget, Compliance, and Sustainable Development
Political Geography:
Uganda and Africa

8. The German 'Schuldenbremse' crisis: a symptom to be taken seriously in Europe

Author:
Clara Bösche
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
Robert Schuman Foundation (RSF)
Abstract:
The priority to be given to the ecological transition and its practical implementation are dividing Germany and Europe. The European Union is being accused of making the conditions of production for farmers even more difficult: the number of demonstrations across the European Union has been rising after the Germans began their protests on 15 January 2024, as they denounced the ambitions of the European Green Deal, as well as the human and financial costs. At the start of 2024, the German coalition government (SPD, Greens and FDP Liberals) led by Chancellor Olaf Scholz (SPD) is struggling, since its draft budget has been cut by around €60 billion. The origins of the budget cuts to which the government has had to resort lie in a decision taken by the Constitutional Court of Karlsruhe dated 15 November 2023. The latter censured the decision to reallocate 60 billion €, initially intended to cushion the economic impact of the pandemic crisis, to a special fund for the transformation of the economy and the climate. For two months now, opposition has been growing in Germany over the resources allocated, the priorities to be defined and the rules governing public debt. The constitutional appeal was lodged by CDU-CSU members of parliament, who denounced the government's "sleight of hand". As Germany enters a recession, the debate is whether or not it is still appropriate to limit public debt to 0.35% of GDP. Current circumstances no longer justify bending the rule: the pandemic crisis is over, and the exceptional funds earmarked should not be used for the economy or the environment. As a result, since the Constitutional Court's ruling against the federal budget, in addition to opposition over the priority to be given to the green transition in economic and agricultural life, further opposition has emerged: regarding whether the constitutional principle of the debt brake (Schuldenbremse) should be reformed or not. This principle is firmly defended by Friedrich Merz, leader of the CDU and of the CDU/CSU in the Bundestag. In his view, the debt brake is the only way to avoid saddling future generations with debt, and he fears that lifting it might have a knock-on effect in terms of the financial stability of other European Union countries. Within the government, the SPD and the Greens (led by the Vice-Chancellor and Minister for the Economy, Robert Habeck), would like to reform the debt brake to facilitate the necessary investments, in line with the European Green Deal. However, within the same government, the FDP Liberals, led by Finance Minister Christian Lindner, have long refused to challenge this constitutional principle, in the same way as the CDU/CSU opposition. Christian Lindner is therefore in a difficult situation, caught between traditional positions, his coalition partners and the opposition. A hard-won agreement on the 2024 budget, on 13 December 2023, provides for cuts that will result, in particular, in the reduction of tax relief on diesel on agricultural machinery - the main focus of demonstrations in Germany – but also in a postponement of the “climate bonus”. Priorities have had to be set because of this cutback, but they are the source of dissatisfaction both on the part of the farmers, as well as the promoters of the European Green Deal. The debate on Germany's levels of debt, in the light of the demonstrations now rocking the country, is further weakening the coalition - the aim in this paper is not to take position on this - but above all, to consider the problem of the priorities to be identified, not only in Germany but also in Europe.
Topic:
Budget, European Union, Tax Systems, and Green Transition
Political Geography:
Europe and Germany

9. “¡Viva la universidad, carajo!” Argentines March in Defense of Public Education

Author:
Roberto Hernández Hernández
Publication Date:
04-2024
Content Type:
Commentary and Analysis
Institution:
The North American Congress on Latin America (NACLA)
Abstract:
Hundreds of thousands took to the streets in an unprecedented mobilization to reject President Javier Milei's budget cuts to public universities.
Topic:
Education, Budget, Protests, Universities, and Javier Milei
Political Geography:
Argentina and South America

10. Lessons from China's fiscal policy during the COVID-19 pandemic

Author:
Tianlei Huang
Publication Date:
03-2024
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
Expansionary fiscal policy helped China's economy grow in 2020, a year in which most economies contracted because of the COVID-19 pandemic. Amid a broader pivot to policy and regulatory tightening, fiscal support was withdrawn in 2021. In 2022, government budget turned expansionary to ensure economic stability ahead of the Communist Party Congress, but the execution fell short and fiscal policy ended up being weaker than planned. A recurrent problem during the pandemic, however, was that local governments did not fully spend their budgets. Aside from the sharp drop in local governments' land sale revenue in 2022, which dragged down their spending, it was also caused by local governments' failure to fully utilize their special bond quotas approved by the central government for capital investment. China's fiscal policy during the COVID-19 pandemic highlights four issues with implications for fiscal policy making. First, the government needs to avoid projecting unrealistically high land sale revenue in its budgets. Second, it needs to reconsider its problematic use of local-government special bond as a major fiscal stimulus instrument. Third, it needs to make sure its deficit, growth, and inflation targets are consistent. Last, Beijing needs to be more tolerant of higher fiscal deficits, at a minimum ensuring that overall fiscal spending grows at least as rapidly as nominal output.
Topic:
Budget, Economic Growth, Fiscal Policy, COVID-19, and Fiscal Deficit
Political Geography:
China and Asia