I’m Mary Walden, with economist MW, welcoming you to the economic perspective. Today’s program asks if we need a national rainy day fund. Mike, many economists are predicting a recession will hit the economy next year. If this happens, it will likely reduce tax revenues to the federal government and cause federal borrowing to increase. Is there a way to prevent this?
Mike: Summary Answer
- States face the same situation, and many have instituted Rainy Day Funds to deal with
- RDFs are simply savings plans that states accumulate during good economic times, then use during bad economic times to replace diminished tax revenues
- NC has one
- Federal government could do the same thing to replace increased borrowing during recessions
- I estimate an annual contribution of $200 billion would get a sufficient federal RDF.
- I’m MW
And I’m Mary Walden for the Economic Perspective, an NC State Extension program from the Department of Agricultural and Resource Economics.