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Mohamed A. El-Erian

These Four Elements Map Out Sound Fiscal Policy

The White House and Congress can set a path for a sustainable recovery. Not everything has to be done all at once.

The journey starts with the first step.

The journey starts with the first step.

Photographer: Leila Macor/AFP/Getty Images

An ambitious destination shouldn’t derail a constructive step in the journey to it. This is an important consideration as the White House intensifies talks with Congress about how to respond to the historic economic shock delivered by Covid-19 and, in the process, relieve the excessive burden on monetary policy.

Four elements underpin optimal fiscal policy at this juncture of the virus crisis: providing more relief; better aligning public health and economic well-being during this period of “living with Covid-19”; countering long-term downward pressures on productivity; and limiting the rise in household economic insecurity. Throughout, the focus should predominantly be on supporting people directly and effectively rather than going through markets.