Advanced economies have already spent enormous amounts providing pandemic relief to households and small and medium-sized businesses. The International Monetary Fund’s June outlook estimates that, including fiscal measures and credit guarantees, spending reached approximately 20 percentage points of GDP.
In the United States, Congress is considering new spending ranging from 5 per cent of GDP (Republicans) to 15 per cent (Democrats). And still more government spending, and thus borrowing, will be needed by the time the pandemic is behind us.
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Project Syndicate
Raghuram G. Rajan, former governor of the Reserve Bank of India, is Professor of Finance at the University of Chicago Booth School of Business.
