Government always grows during a crisis. And it rarely gives up all of its emergency powers when the crisis passes. This has already happened three times this century: following the September 11, 2001 attacks, the 2008 financial crisis, and the COVID-19 pandemic. In a new paper, my colleague Wayne Crews argues for an Abuse of Crisis Prevention Act: a wide range of institution-level policies that would leave government better prepared for crises with rainy-year funds and other stockpiles, constraints on power grabs during emergencies, and sunsets on power grabs when the crisis ends. The paper is here.
If you prefer a shorter version, Wayne and I have a piece in National Review this morning explaining why an Abuse of Crisis Prevention Act is important, along with a couple of policies to include in it:
Nobody knows what the next crisis will be, or when it will hit. But we do know there will be one at some point and that governments will respond to it with massive spending. There is no need to create surprise debt for something everyone knew could happen. Governments should save up during good times to give themselves more flexibility during the bad times, without hoarding investment capital at the worst possible time.
Second, bind the Federal Reserve to a monetary policy rule. The Fed informally followed a Taylor rule during the low-inflation Great Moderation from the 1990s through 2007. … But the Fed abandoned this rule during the financial crisis and in its panic caused a brief deflation. That mistake turned what could have been an ordinary recession into the worst downturn in seven decades.
Discretion also let the Fed bungle its Covid response.