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These studies point toward tax policy as the best fiscal tool to combat recession, particularly tax changes that influence incentives to invest, like an investment tax credit.
Fortunately, there is a powerful fiscal tool that could address both problems: Congress could grant workers a temporary holiday from the forced savings program known as Social Security.
But states still face short-term challenges and enormous long-term liabilities, and Standard & Poor's cautioned last week that "compared to when the recession began, state and local governments have fewer tools in their fiscal tool boxes".
But drones are like an economist's fiscal tool, clean and efficient until they encounter real-world politics.
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And they do not want their governments to renounce all fiscal tools for fighting recessions.
We have moved into an era where the White House and Congress have no fiscal tools available to move this $10.5 trillion economy very quickly.
But no longer is the option of countering a downturn with fiscal tools confined to rich countries.But should that option be exercised?
Officials in the Obama administration also seem to agree that after the $787 billion stimulus last year and the $858 billion tax-cut compromise just approved by Congress, the government's arsenal of fiscal tools has just about been used up.
Addressed at the triple crunch of the credit crisis, high oil prices and global warming, the plan is to rein in reckless financial institutions and use a range of fiscal tools, new measures and reforms to the tax system, such as a windfall tax on oil companies.
Only Mali seems to have become engaged in the development of a real institutional framework, the establishment of regulatory and fiscal tools, and the implementation of a strategy document.
The first is that the monetary and fiscal tools they have to manage their way out of short-term slumps are no longer effective or available--interest rates are already at almost zero and can't be cut much more, and there is no political appetite to let politicians borrow more to spend more.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com