The Economic Perspective: “Do We Need a National Rainy Day Fund?”

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

  1. States face the same situation, and many have instituted Rainy Day Funds to deal with
  2. RDFs are simply savings plans that states accumulate during good economic times, then use during bad economic times to replace diminished tax revenues
  3. NC has one
  4. Federal government could do the same thing to replace increased borrowing during recessions
  5. I estimate an annual contribution of $200 billion would get a sufficient federal RDF.
  6. 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.