Paying for the COVID-19 Catastrophe

The nation must not halt its economic recovery efforts, but policy makers must prepare for the consequences, and consider their options.This Solutions Brief offers a plan toward long-term fiscal soundness that would prevent the recovery from the pandemic from undermining the federal government’s ongoing fiscal standing by segregating new debt incurred from recovery intiatives into a separate financial entity, financing it with bonds of the longest maturity, and paying the interest through an addition to current revenues. Though now is not the right time to impose a payment mechanism for the incremental debt caused by the recovery effort, it is not too early to consider what that mechanism should be.