Committee for a Responsible Federal Budget

Three International Economists Join Announcement Effect Club

Apr 9, 2010 | Economics

Along with the daffodils, the onset of spring has seen the blossoming of the “announcement effect” in the public discourse. Three international economists joined the Announcement Effect Club and a prominent member reaffirmed his charter membership this week.

Stephen G. Cecchetti, M. S. Mohanty and Fabrizio Zampolli of the Bank for International Settlements sprung into the club with their paper, The Future of Public Debt: Prospects and Implications. On page 2, the paper states:

While fiscal problems need to be tackled soon, how to do that without seriously jeopardising the incipient economic recovery is the current key challenge for fiscal authorities. In this paper, we do not address this issue, but we note that, in our view, an important part of any fiscal consolidation programme is measures to reduce future liabilities such as an increase in the retirement age. Announcements of changes in future programmes would allow authorities to wait until the recovery from the crisis is assured before reducing discretionary spending and improving the short-term fiscal position.

Federal Reserve Chairman Ben Bernanke re-upped his membership in the club with his remarks to the Dallas Regional Chamber of Commerce on Wednesday. He stated:

However, nothing prevents us from beginning now to develop a credible plan for meeting our long-run fiscal challenges. Indeed, a credible plan that demonstrated a commitment to achieving long-run fiscal sustainability could lead to lower interest rates and more rapid growth in the near term.