Ten Commandments for Fiscal Adjustment
Go read the post – there’s a paragraph on each one. I don’t entirely agree – but the rules are a good starting point for debate and very different from the path outlined by the budget.
Commandment I: You shall have a credible medium-term fiscal plan with a visible anchor (in terms of either an average pace of adjustment, or of a fiscal target to be achieved within four–five years).
Commandment II: You shall not front-load your fiscal adjustment, unless financing needs require it.
Commandment III: You shall target a long-term decline in the public debt-to-GDP ratio, not just its stabilization at post-crisis levels.
Commandment IV: You shall focus on fiscal consolidation tools that are conducive to strong potential growth.
Commandment V: You shall pass early pension and health care reforms as current trends are unsustainable.
Commandment VI: You shall be fair. To be sustainable over time, the fiscal adjustment should be equitable.
Commandment VII: You shall implement wide reforms to boost potential growth.
Commandment VIII: You shall strengthen your fiscal institutions.
Commandment IX: You shall properly coordinate monetary and fiscal policy.
Commandment X: You shall coordinate your policies with other countries.