Guido Tabellini
The Covid-19 pandemic has imposed significant economic hardships on affected economies. The aggregate effects on national incomes have been significant. Unemployment in the US rose from 3.5% in February 2020, just before the impact of the pandemic, to 14.7% by April 2020. Relative to a year ago, second-quarter GDP in the US dropped by 9.0%; in the euro area, the fall was 14.6%. Worldwide, the modal growth rate of GDP fell more than 10 percentage points in the first half of 2020 relative to the most recent IMF forecast (Furceri et al. 2021).
In response to the deep pandemic recession, national governments and the EU have responded with monetary and fiscal policies meant to stimulate their economies. Recently, President Biden proposed, and Congress approved, a $1.9 trillion debt-financed increase in national spending known as the American Rescue Plan (ARP). The plan includes $320 billion in assistance for state and local governments to offset pandemic-induced losses