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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. Spillover effects of the recent US monetary policy shocks on the South African economy: The role of monetary and fiscal policy coordination

Author:
Guangling Liu and Marrium Mustapher
Publication Date:
11-2024
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This study examines how different policy mix regimes affect the impact of recent US contractionary monetary policy on South Africa’s inflation and business cycles. The study uses a small open economy New Keynesian Dynamic Stochastic General Equilibrium model with an integrated fiscal block to analyse these effects. Regime M (active monetary policy) is more effective at containing the spillover effects but leads to higher public debt, requiring larger future fiscal surpluses. The commitment to price stability under Regime M increases real interest rates, raising domestic debt service costs and the debt-to-GDP ratio. Regime F (active fiscal policy), in contrast, stabilizes debt more quickly but at the cost of higher inflation, as it does not use future surpluses to manage public debt. These spillover effects are more amplified under both Regime M and Regime F in the case of a complete exchange rate pass-through and a higher degree of trade openness, with Regime F exhibiting a stronger amplification effect.
Topic:
Foreign Policy, Economics, Monetary Policy, Inflation, and Fiscal Policy
Political Geography:
Africa, South Africa, North America, and United States of America

3. The Fiscal Impact of Immigration in the United States

Author:
Alex Nowrasteh, Sarah Eckhardt, and Michael Howard
Publication Date:
03-2023
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
The National Research Council and the National Academy of Sciences (NAS) published groundbreaking investigations into the economics of immigration in 1997 and 2017. Both publications contained thorough literature surveys compiled by experts, academics, and think tank scholars on how immigration affects many aspects of the U.S. economy. The 2017 NAS report included an original fiscal impact model as a unique contribution to immigration scholarship. Its findings have been used by policymakers, economists, journalists, and others to debate immigration reform. Here, we acquired the exact methods used by the NAS from its authors to replicate, update, and expand upon the 2017 fiscal impact model published in the NAS’s The Economic and Fiscal Consequences of Immigration. This paper presents two analyses: a measure of the historical fiscal impacts of immigrants from 1994 to 2018 and the projected long‐​term fiscal impact of an additional immigrant and that immigrant’s descendants. An individual’s fiscal impact refers to the difference between the taxes that person paid and the benefits that person received over a given period. We use and compare two models for these analyses: the first follows the NAS’s methodology as closely as possible and updates the data for more recent years (hereafter referred to as the Updated Model), and the second makes several methodological changes that we believe improve the accuracy of the final results (hereafter referred to as the Cato Model). The most substantial changes made in the Cato Model include correcting for a downward bias in the estimation of immigrants’ future fiscal contributions identified by Michael Clemens in 2021, allocating the fiscal impact of U.S.-born dependents of immigrants to the second generation group, and using a predictive regression to assign future education levels to individuals who are too young to have completed their education. Other minor changes are discussed in later sections. Immigrants have a more positive net fiscal impact than that of native‐​born Americans in most scenarios in the Updated Model and in every scenario in the Cato Model, depending on how the costs of public goods are allocated. The Cato Model finds that immigrant individuals who arrive at age 25 and who are high school dropouts have a net fiscal impact of +$216,000 in net present value terms, which does not include their descendants. Including the fiscal impact of those immigrants’ descendants reduces those immigrants’ net fiscal impact to +$57,000. By comparison, native‐​born American high school dropouts of the same age have a net fiscal impact of −$32,000 that drops to −$177,000 when their descendants are included (see Table 31). Results also differ by level of government. State and local governments often incur a less positive or even negative net fiscal impact from immigration, whereas the federal government almost always sees revenues rise above expenditures in response to immigration. With some variation and exceptions, the net fiscal impact of immigrants is more positive than it is for native‐​born Americans and positive overall for the federal and state/​local governments.
Topic:
Immigration, History, and Fiscal Policy
Political Geography:
North America and United States of America

4. Central Bank Digital Currency: The Risks and the Myths

Author:
Nicholas Anthony and Norbert Michel
Publication Date:
01-2023
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Central bank digital currencies (CBDCs) have the potential to radically transform the American financial system—ultimately usurping the private sector and endangering Americans’ core freedoms. Although CBDCs have gained the attention of politicians, central bankers, and the tech industry, this experiment should be left on the drawing board. This paper provides a summary of why Congress should explicitly prohibit the Federal Reserve and the Department of the Treasury from issuing a CBDC.
Topic:
Finance, Economy, Fiscal Policy, Banking, and Digital Currency
Political Geography:
North America and United States of America

5. Is the supermultiplier nil? - A Replication Study of Deleidi and Mazzucato (2021)

Author:
Jens Boysen-Hogrefe
Publication Date:
05-2023
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Analyzing US macro data via a structural vector-autoregressive model, Deleidi and Mazzucato (2021) find strong positive spillover of mission-oriented government spending on private research and development activity and on overall economic dynamism ("crowding in"). However the result hinges on specific transformation of the data. Deleidi and Mazzucato deflate all variables in their model via the GDP deflator. Applying originally price adjusted data a spillover on GDP cannot be found. Estimating the model with data starting in 1984, the results point at “crowding out” of private research and development activity.
Topic:
Economics, Fiscal Policy, Innovation, and Fiscal Multipliers
Political Geography:
North America and United States of America

6. Using Real-Time Google Search Activity to Target Emergency Fiscal Stimulus

Author:
John Kearns
Publication Date:
05-2023
Content Type:
Journal Article
Journal:
Journal of Public and International Affairs (JPIA)
Institution:
School of Public and International Affairs (SPIA), Princeton University
Abstract:
In the aftermath of the COVID-19 pandemic, the U.S. Congress transferred nearly $1 trillion USD to state and local governments between April 2020 and March 2021 to support vaccination efforts, keep schools open, and sustain economic recovery. As of March 2023, much of this money remained unspent, raising questions about the underlying process of determining the size and distribution of aid. This paper explores how Google search data and machine learning models can work in real-time to assist policy makers in evaluating fiscal policy proposals. These results are among the first pieces of evidence that economic models can feasibly integrate alternative sources of data to provide real-time estimates of economic activity at the state level. The author’s models provide reliable and accurate estimates of state and local fiscal need and indicate the states that need relief the most months ahead of official estimates. The more tailored models presented in this paper could lead to more equitable and effective outcomes at a fraction of the cost to taxpayers when used to inform emergency fiscal stimulus distribution in the future.
Topic:
Economics, Public Policy, Fiscal Policy, and COVID-19
Political Geography:
North America and United States of America

7. A Rotten Money Regime is Responsible for Pandemic and War Inflation

Author:
Brendan Brown
Publication Date:
10-2022
Content Type:
Special Report
Institution:
Hudson Institute
Abstract:
Who is responsible for the Great Pandemic and War Inflation of 2021–22? Is it Federal Reserve Chair Jay Powell, former President Donald Trump, President Joe Biden, or President Vladimir Putin? The answer is that the buck stops at a rotten monetary regime—the so-called “2-percent-inflation standard.” Trying to blame particular individuals may help those who gain from the present monetary status quo. Yet blaming them absolves the monetary regime, which is trampling upon the green shoots whose growth is essential for the renaissance of competitive free-market capitalism. If the United States had a good money regime when first the pandemic and then the Russian war struck the economy, the great monetary inflation that these shocks spawned would not have occurred. The current money regime might well have done better with more capable leadership and good luck—but the regime’s deep flaws prevented the possibility of an overall good outcome. Furthermore, even if the pandemic and war had not struck, the bad money regime was producing bad outcomes—including economic sclerosis with sluggish growth rates for productivity and living standards while advancing monopoly capitalism. These outcomes could well have gotten a lot worse.. This policy memo focuses on the shocks of the pandemic and war rather than what could have happened without them. However, it does venture into the counterfactual of how a good money regime would have responded to those shocks, while helping demonstrate what has gone wrong. Demonstrating the links between the rottenness of the monetary system and the high inflation during the pandemic and Russian war requires sharing with the reader a preview of the differences between good and bad money regimes. A broader analysis of these should follow in subsequent policy memos
Topic:
Economics, Inflation, Fiscal Policy, and COVID-19
Political Geography:
North America and United States of America

8. Fiscal Policy in the Regulation of Adult-Use Cannabis in Colombia: Executive Summary

Author:
César Rodríguez-Garavito, Luis Felipe Cruz-Oliveira, and Isabel Pereira-Arana
Publication Date:
07-2022
Content Type:
Special Report
Institution:
Dejusticia
Abstract:
In Colombia today, discussing a legal framework for marijuana is not a hypothetical matter – it’s a real political possibility. In fact, in the 2018-2022 legislative period, three bills were introduced that proposed regulating cannabis for adult use as well as coca-leaf derivatives. This regulatory boom is not exclusive to Colombia; to date, 19 states in the United States and two countries – Uruguay and Canada – have approved a legal framework for adult-use marijuana. This marks a significant change from the hardhanded laws that have shaped the war on drugs from the time of former U.S. President Richard Nixon to the present. In Colombia, cannabis is the most widely used substance that has been declared illicit. According to the National Survey of Psychoactive Substance Use (Encuesta Nacional de Consumo de Sustancias Psicoactivas), published in 2019 by the country’s Ministry of Justice and the National Administrative Department of Statistics (Departamento Administrativo Nacional de Estadística, DANE), more than 637,000 people used marijuana within the last year (2019, p. 66), which corresponds to 2.7% of the population between 12 and 65 years of age2 . Seventy-two percent (72%) of these people were between 18 and 34 years of age and lived in Bogotá, Cali, the coffee belt or Medellín (Ministerio de Justicia & DANE, 2019, p. 68). According to the National Planning Department (Departamento Nacional de Planeación, DNP), the geographical distribution of marijuana use tends to be concentrated in urban areas that are attractive for selling the cannabis produced in the Northern Cauca subregion (DNP, 2017, p. 105). Although that is not the only region with marijuana crops, the country is currently experiencing a boom in so-called “creepy” marijuana3 (as a result of the extent of this substance and dependence on the income from it), which is produced in the Northern Cauca municipalities of Caloto, Corinto, Miranda, Toribío and Santander de Quilichao. In this context, two sensitive factors arise in debating cannabis regulation in Colombia. One is that the areas that supply the illegal market have significant gaps in terms of socioeconomic well-being and continue to experience conflict dynamics partly associated with the substance’s prohibition. The other is that the regulation of marijuana, as the most widely consumed illicit substance in the country, must address the protection of public health and the health of those who use it. The majority of regulation proposals put little emphasis on the potential revenue coming from the market, or the allocation of those resources. If we agree that marijuana has played a central role in the origins of drug trafficking in Colombia, and that the regions where it is grown today lag significantly in socioeconomic terms, the transition to a legal market would be an opportunity to improve the peasant farmer and indigenous population’s living conditions, while also protecting public health by controlling the quality and potency of the cannabis that is bought and sold. All of these public policy actions require resources. While those who promote business interests in marijuana regulation insist on stressing the economic benefits for the overall economy, along with the amount of resources it would contribute to state coffers, they fail to mention specific measures that the State should delineate so the market can be based on rules that would finance the actions needed to address the regional problems that predate the regulations, or actually gave rise to the illegal trade. With the goal of illuminating this discussion, based on comparative experiences and on the Principles and Guidelines for Human Rights in Fiscal Policy, this document addresses three dimensions of the problem: (i) explaining, based on available evidence and conceptual debates, why regulation is necessary and what role the fiscal framework plays in this policy; and (ii) providing, based on comparative experiences, elements for designing the regulations’ fiscal frameworks. Finally, contemplating these two aspects, we present a proposal for cannabis fiscal principles.
Topic:
Regulation, Fiscal Policy, and Cannabis
Political Geography:
Canada, Colombia, South America, Uruguay, and United States of America

9. An Impact Analysis of California’s State-County Assessors’ Partnership Agreement Program

Author:
Geoffrey Propheter
Publication Date:
01-2022
Content Type:
Journal Article
Journal:
California Journal of Politics and Policy
Institution:
Institute of Governmental Studies, UC Berkeley
Abstract:
California’s State-County Assessors’ Partnership Agreement Program (SCAPAP) provided select counties with a dollar-for-dollar matching grant from the state for assessment administration over a three-year period from fiscal year 2015 through 2017. One of the policy goals for the grant was to finance administrative activities that would lead to an increase in the property tax base, thereby increasing property tax revenue. This study evaluates how well the grant accomplished this goal. Using the synthetic control method on data from 2007 through 2018, I find little evidence SCAPAP funds increased participating counties’ property tax base. Since the purpose of the program is based on sound economic theory, I caution interpreting this conclusion as a reason to discontinue policy experimentation.
Topic:
Economics, Governance, Tax Systems, and Fiscal Policy
Political Geography:
California, North America, and United States of America

10. The Unprecedented Federal Fiscal Policy Response to the COVID-19 Pandemic and Its Impact on State Budgets

Author:
Phil Dean
Publication Date:
01-2022
Content Type:
Journal Article
Journal:
California Journal of Politics and Policy
Institution:
Institute of Governmental Studies, UC Berkeley
Abstract:
In response to the COVID-19 pandemic, within a year’s time span, the federal government enacted unprecedented fiscal response bills totaling over $5 trillion. This response amount equates to about 25% of U.S. GDP in 2020. These massive allocations funded direct pandemic public health responses, along with vast fiscal support for households, firms, and state and local governments. This enormous response supported state and local government budgets both indirectly and directly, resulting in a marked budgetary shift from anticipated shortfalls to significant revenue growth and inflationary budget pressures.
Topic:
Budget, Fiscal Policy, Pandemic, and COVID-19
Political Geography:
North America and United States of America