Abstract
We put forward here a fiscal policy framework for the post-COVID19 era, intended to balance between adherence to fiscal discipline and the provision of adequate public services, which have been rather neglected in Israel. The new framework requires the government to set at the beginning of its term two key policy targets, to be achieved over the course of its tenure )i.e., in 4–5 years(: a debt-to-GDP target and a government expenditure-to-GDP target. These targets are then inputted into two equations reflecting the prevalent fiscal rules, one for the allowed deficit and the other for the rate of change of the budgetary expenditure, which in turn render the prescribed annual budget. The government expenditure-to-GDP ratio in Israel has sharply decreased over the past 15years, bringing about a significant deterioration in basic public services, and shifting the financial burden to households. The economic crisis brought about by the pandemic forced the government to greatly increase expenditures, letting the debt-to-GDP ratio rise way above the 60% level that prevailed before that. As the economy works its way back to normal, it is imperative to define a clear fiscal policy that allows to improve the provision of public services, which requires in turn increasing budgetary outlays, and at the same time preserves fiscal discipline so as to return eventually to a sustainable debt-to-GDPratio. Such a delicate balancing act requires a well-defined set of rules such as those proposed here, and a serious commitment to adhere to them over time.
Translated title of the contribution | Towards a Balanced Fiscal Policyfor the Post-Corona Era |
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Original language | Hebrew |
Pages (from-to) | 39-74 |
Number of pages | 36 |
Journal | רבעון לכלכלה |
Volume | 65 |
Issue number | 1-2 |
State | Published - 2021 |
IHP Publications
- ihp
- COVID-19 (Disease)
- COVID-19 Pandemic, 2020-
- Cost
- Fiscal policy