West Wing-style fiscal policies aren't the only way to fight the next recession | Kenneth Rogoff

Spending and tax measures are in favour, but central banks' monetary policy has a role to play

Will the next recession be worse than you think? With the major central banks having little space for further interest-rate cuts, might the next cyclical downturn become a crash? In theory, fiscal policy can go far in filling the void. The past decade has seen a rise in fiscal evangelism among many economists and policymakers, and it is indeed likely that fiscal fine-tuning will be widely tested in the next downturn. Are they right?

I am sceptical. Fiscal policy is far too politicised to substitute consistently for modern independent technocratic central banks, which until now have largely taken the lead in short-term stabilisation. Fiscal policy takes the lead in fundamental but hugely contentious issues - concerning growth, long-term stability and allocation - that need to be decided in a democratic fashion, at least in advanced economies. And yet academic depictions of fiscal policy as an objective technocratic tool often make one feel like we are living in an episode of the American television series The West Wing.

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