Fiscal policy in interesting times

Thanks to economic and fiscal uncertainties, we know less than usual about what’s going on, but we are playing for bigger stakes.

By , Guest blogger

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    On July 21, Federal Reserve Board Chairman Ben Bernanke testified before the Senate Banking, Housing and Urban Affairs Committee on "The Semiannual Monetary Policy Report to the Congress," describing the economic outlook as "unusually uncertain."
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Back on August 5, I gave a speech at the Retirement Research Consortium’s annual conference “Retirement, Planning, and Social Security in Interesting Times.” I’ve been saving up the link to the C-Span video to share during my vacation.

Here it is. (I hope the link still works; if not, I will fix it once I get back on the grid.)

Keeping with the spirit of the event, I spoke about “Fiscal Policy in Interesting Times.” And with that title, I simply had to mention the famous curse, “May you live in interesting times.”

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As the helpful folks at Wikipedia point out, chances are good that this curse originated in England or the United States not, as often alleged, China. Regardless of its origin, it’s still an excellent curse, which I remember my mom invoking often in my childhood (rhetorically, I should note, not at me). For an audience of policy researchers, however, it’s a curse with a silver lining. We may not want interesting things to happen (financial crises, trillion-dollar deficits, 9.5% unemployment, etc.), but they do increase the odds that policymakers, journalists, and the public will pay attention to what we are saying (whether they should is a separate question …).

What makes today particularly interesting is that we face lots of uncertainty and major challenges. That a potent mix. We know less about what’s going on than usual, but we are playing for bigger stakes. Case in point: Fed Chairman Ben Bernanke’s recent statement about the outlook being “unusually uncertain” while the economy still struggles to heal from the financial crisis. Is it a rebound or a relapse? I fear it may be the latter, but we just don’t know.

The meat of the speech considers the economic and fiscal uncertainties and challenges we face. For example, I lament the ridiculous uncertainty in our tax system. Not only do we not know what will happen in 2011, after the scheduled expiration of the 2001 and 2003 tax cuts, we don’t even know what the tax code is in 2010. Will there be an AMT patch? A retroactive change to the temporarily extinct estate tax? What about the (in)famous tax extenders?

I wrap up by sharing one other thing I learned from Wikipedia. The “interesting times” curse is apparently the mildest of a trio of curses.

If you are feeling really mad, the appropriate curse is “May you come to the attention of people in authority.” Which again is rather a mixed curse for policy researchers who want policymkaers to pay attention.

And if you are really, really mad, then you should bring out the worst of the curses: “May you find what you are looking for.”

P.S. At the moment, I am looking for puffins, humpback whales, glaciers, and grizzly bears.

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