Georgia budgets to boost economic growth during the Covid-19 crisis – leading macroeconomic influencers

16 February 2021 (Last Updated February 16th, 2021 11:06)

Economists believe that Georgia has been more effective in responding to the coronavirus pandemic, compared to other US states.

Georgia budgets to boost economic growth during the Covid-19 crisis – leading macroeconomic influencers
Credit: Orpheus FX, Shutterstock.com.

The US state of Georgia continues to budget conservatively, focusing on key areas such as restoring education, expanding internet access, and prioritising public health.

Jeffrey Dorfman

Jeffrey Dorfman, Georgia’s state fiscal economist, retweeted Governor Brian Kemp’s signing of the amended fiscal year 2021 budget. Kemp added that funding the budget with no agency cuts, furloughs, layoffs, or new taxes was possible only because of Georgia’s balanced response to the Covid-19 pandemic.

The governor stated that the state was quick to respond to the coronavirus pandemic and budget conservatively, as other states resorted to cutting essential services, raised taxes or furloughed workers.

Kemp stated that the amended budget not only restored critical funding but also provided a foundation for continued growth, even in the midst of the pandemic. For example, the state has managed to restore education funding with over $610m for K-12 schools and $1,000 bonus to be provided to teachers and state employees, has invested $20m to expand rural broadband access, and has allocated approximately $300,000 towards supporting hospitals and healthcare staff.

Noah Smith

Noah Smith, an opinion columnist, retweeted on aggregate employment effects of unemployment benefits during deep downturns and evidence gained from the expiration of the federal pandemic unemployment compensation.

According to the author of the research paper, Arindrajit Dube, an economist, the expiration of the temporary $600 boost to weekly unemployment insurance (UI) benefits under the Federal Pandemic Unemployment Compensation (FPUC) resulted in a sharp, unprecedented, 98% point reduction in the replacement rate when employment seemed to be recovering during the Covid recession.

Dube further added that it may have been possible that the micro labour supply elasticity was depressed during the Covid crisis due to restrictions. However, during August to November, unemployment was steadily falling, while more people were returning to work. He also opines that the change in UI may have caused the large drop in wages and prompted vacancies, creating a micro-macro wedge.

Alicia García-Herrero

Alicia García-Herrero, an economist and academic, re-tweeted an article on emerging nations being better equipped to survive the pandemic’s economic shocks than developed nations. According to the economist, however, reforms in the emerging markets seem to be rather limited, while debt has accumulated even faster than in developed markets pre-Covid and even during the Covid crisis. For example, official statistics state that China has piled up 19% of GDP in debt in 2020.

The article detailed an optimistic view of the fate of emerging markets in the post Covid era, compared to the developed markets. According to experts, emerging countries are pushing for reform, rather than pumping in big money like the developed markets during the coronavirus pandemic and are more likely to succeed in it.

As emerging markets were still struggling since the Covid-19 outbreak, they lacked the money to revive their economies with stimulus. However, according to research, the typical emerging nation did increase the total stimulus from 6% of in 2008 to 9% in 2020. In comparison, developed nations increased the stimulus from 10% to 33% of GDP for the same period.