Sunday, March 6, 2016

Fire Up the Helicopters!

In the face of slow growth and risk of recession, Kemal Dervis of the Brookings Institution states the obvious:

But policymakers have one more option: a shift to “purer” fiscal policy, in which they directly finance government spending by printing money – a so-called “helicopter drop.” The new money would bypass the financial and corporate sectors and go straight to the thirstiest horses: middle- and lower-income consumers. The money could go to them directly, and through investment in job-creating, productivity-increasing infrastructure. By placing purchasing power in the hands of those who need it most, direct monetary financing of public spending would also help to improve inclusiveness in economies where inequality is rising fast. 
Helicopter drops are currently proposed by both leftist and centrist economists. In a sense, even some “conservatives” – who support more public infrastructure spending, but also want tax cuts and oppose more borrowing – de facto support helicopter drops.