Policy Questions that Economics Experts Can Help Answer

What do economic crises, fiscal stimulus packages and marijuana legalization have in common? They raise policy questions that economics experts can help answer. Three speakers outlined their work on those issues at last year’s Women in Economics Symposium, which focused on ways that those working in economics make a difference in the world.

Based on a Feb. 17, 2021, breakout session on making a difference by contributing to economic policy, this blog post highlights the experiences of:

• Jane Ihrig, a senior adviser at the Federal Reserve Board of Governors
• Beth Johnston, a policy advisor at the Minnesota Department of Revenue
• Louise Sheiner, the Robert S. Kerr senior fellow in economic studies and policy director for the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution

Sign up for the 2022 Women in Economics Symposium

The St. Louis Fed’s Women in Economics Symposium will be held virtually on Feb. 23 and 24 this year. To learn more about the event and to register, visit Women in Economics Symposium 2022: Leading the Way in Challenging Times.

“We encourage young women who are interested in economics and are considering economics as a college major to join us to hear from women working in the field,” Mary Suiter, St. Louis Fed economic education officer, said in a news release about the event.

Analyzing the Fed’s Actions during the COVID-19 Crisis

Jane Ihrig, Federal Reserve
Board of Governors

Ihrig noted that when the COVID-19 crisis first hit, the Federal Reserve lowered the target range for the federal funds rate to near zero very quickly, and also took steps to help stabilize financial markets and to help credit continue to flow through the economy.

Ihrig, who works in the division that focuses on monetary policy at the Board of Governors, said that she was involved in lots of discussions and meetings at the time that focused on actions the Fed could take and how such actions could help the U.S. economy. Those kinds of memos or discussions went to the Federal Open Market Committee, the Fed’s main monetary policymaking body, as the FOMC was deciding how to respond to the crisis, Ihrig said.

She also talked about a Page One Economics article she worked on to explain to high school and college students how the Fed responded to the COVID-19 crisis, why the Fed took those actions and how businesses and households responded.

“We want to make sure we spread the word about what we’re doing and why we’re doing it,” she said.

Estimating the Economic Impact of Fiscal Stimulus

Louise Sheiner,
Brookings Institution

Sheiner, who works at the think tank Brookings Institution, has analyzed the economic impact of various fiscal stimulus packages during the COVID-19 pandemic.

For example, at the time of last year’s Women in Economics Symposium, Sheiner and her colleague Wendy Edelberg had recently analyzed the potential macroeconomic impact of the Biden Administration’s proposed $1.9 trillion federal spending package, known as the American Rescue Plan. (President Joe Biden signed the package into law in March 2021, the month after the Women in Economics event.)

The fiscal package included enhanced unemployment benefits and higher child tax credits, among other aid. Sheiner and Edelberg used estimates from economic literature on how likely people are to spend money if you give it to them, as well as what happens when someone else receives the money spent, and so on. Through this exercise, they were able to estimate the fiscal package’s total impact on GDP, and published a blog post on their findings.

They estimated that the U.S. economy would return to about where it would’ve been without the pandemic by basically the third quarter of 2021 with the spending package enacted, Sheiner said. Without it, the economy would stay below where it would have been without the pandemic “for quite some time,” according to analysis based on Congressional Budget Office projections, she said.

She noted that such economic stimulus could have implications for inflation and for Fed policy as well.

Focusing on Tax Policy for Legalized Marijuana

Beth Johnston, Minnesota
Department of Revenue

In her job at the Minnesota Department of Revenue, Johnston focuses on property tax and “special tax policy,” which addresses things like cannabis, alcohol, cigarettes and gasoline that have special funds.

Cannabis policy was a focus area for her in 2019, Johnston said. She spent time looking at what would need to be considered on the tax policy side if Minnesota decided to legalize cannabis for adult recreational use. Johnston highlighted two main goals: “One, you want to raise revenue to fund all of the things that states like to pay for. But the other side is you want to eliminate the unregulated market.”

Her policy research largely focused on what has worked in other states and what could be improved to ensure that, when cannabis is legalized, the price isn’t set so high that the unregulated market remains, she explained. Regulation is expensive for states, so the tax policy would need to ensure the state is paying for the administrative costs and also raising money for the legislators’ other goals, she said.

Making an Impact

What is most rewarding about economic policy work?

Ihrig’s answer to that question was that when she came to the Fed, she felt like she was making an impact. She knew that she was being asked to research certain questions because they were important for policy decisions, she said.

The global financial crisis in 2007-09 and the COVID-19 crisis, for instance, showed that monetary policy is needed to help the economy grow stronger, she said.

“And so I feel like where I am at the Fed and some of the things I’m doing [are] just trying to help the U.S. economy be in a better place,” Ihrig said.