"Econ 102" with Noah Smith and Erik Torenberg cover image

The New Axis, Neoliberalism, and Germany [Mailbag]

"Econ 102" with Noah Smith and Erik Torenberg

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Cooperation in Crisis: The Need for a Unified Fiscal Authority

The vital need for collaboration between the Federal Reserve and fiscal authorities during economic downturns highlights the potential efficiency of a coordinated approach to stimulate spending and investment. By jointly addressing recessions with targeted infrastructure projects, such as road building, they could avoid lengthy legislative battles over stimulus packages. However, the implementation of a fiscal authority poses significant political challenges, as it raises concerns over accountability and the risk of deficits being managed by unelected officials. This unpopularity stems from fears of increased inflation and lack of representation in spending decisions, yet these hurdles should not overshadow the potential benefits of such a unified approach.

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