This article was first published on April 2, 2020.
Governments around the world are creating massive new credit programs or expanding existing ones, so it seems a good time to review some lessons from past programs. In 2011, Douglas Elliott wrote a book on the topic, Uncle Sam in Pinstripes: Evaluating US Federal Credit Programs.
In this document we highlight 7 lessons that he drew from the past to help guide new government programs.
- Government credit programs can be a very effective way to counteract market failures.
- Crisis response programs necessarily differ from steady state credit programs.
- Partnering with private sector financial institutions works well under the right circumstances.
- However, partnering with the private sector requires the right incentive structures.
- The right government accounting rules can make a big difference.
- Government credit programs often live far longer than expected.
- The terms of long-lived credit programs virtually always become worse for taxpayers over time.
Learn more in our latest point of view.