- "The cyclical case for additional monetary and/or fiscal stimulus is very strong in light of the weakening economy, but it is hard to see how sufficient support will actually be delivered. Monetary policy is hampered by the zero bound. Meanwhile, some market participants and much of the public worry that additional fiscal stimulus could lead to a budget crisis down the road."
- "A credible commitment to fiscal sustainability could help overcome these concerns on the fiscal side. In particular, the implementation of a well-designed “fiscal rule” could be an effective way to square the circle in signaling a commitment to consolidate from 2012 onward, while creating room for additional stimulus now."
- "International experience shows that fiscal rules can help deliver effective stimulus and
achieve successful fiscal consolidations. In particular, fiscal rules are associated with (1) fiscal expansions that are more effective at reducing unemployment while avoiding spikes in long-term interest rates and (2) larger and more sustained consolidations, particularly when they contain a constraint on government spending."
- "Our results suggest that a US fiscal rule should (1) target the ratio of federal debt to GDP as the ultimate goal, (2) include expenditure constraints and (3) allow for a transition period in which additional stimulus is permissible."
- "We recognize that fiscal rules are only as useful as the underlying political commitment to fiscal sustainability— because Congress can always abandon the rule when it starts to bind. Nonetheless, a fiscal rule could strengthen credibility by promoting transparency and accountability."
GoldmanSachs US Economics Analyst 20100723
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