Rice University’s Baker Institute for Public Policy has received a five-year, $3.2 million grant from the Charles Koch Foundation to fund a program to examine the dynamic effects of major fiscal policies. Given the complexity of the U.S. tax system and the unsustainability of current U.S. fiscal policy, the goal of the program will be to inform policymakers and the general public about the potential effects of reforming U.S. tax and expenditure policies.
The program also will examine the challenges facing the country if policymakers continue to delay finding and implementing solutions to these critical issues. The Dynamic Analysis Program plans to work with other economic modeling groups to increase the accessibility of this type of analysis by creating more open-source models and training students how to use them.
“Unsustainable fiscal policies promise larger budget deficits and long-run increases in the debt-to-gross domestic product ratio, reductions in economic growth in the short term and growing inequality in the distribution of income,” said John Diamond, the Edward A. and Hermena Hancock Kelly Fellow in Public Finance at the Baker Institute, who will lead the program. “Although much research has been focused on these issues, a significant amount of this work ignores or de-emphasizes the short- and long-run dynamic effects of potential reforms.”
The grant will enhance and extend the policy outreach of the research program of Diamond, who is also an adjunct professor of economics at Rice and a former staff economist at Congress’s Joint Committee on Taxation, and George Zodrow, a Baker Institute Rice Scholar and the Allyn R. and Gladys M. Cline Chair of Economics, who worked as an economist at the U.S. Treasury.
The program will support two new public finance fellows at the Baker Institute and collaborate with the Becker-Friedman Institute for Research in Economics at the University of Chicago to train new Ph.D.s in the use of computational models for policy analysis and to disseminate findings.
“The Koch Foundation’s grant strengthens the Baker Institute’s existing research in fiscal policy as our country works to address critical budget and debt issues,” said Baker Institute Director Edward Djerejian. “With the Koch Foundation’s generous support, the institute is establishing our sixth major research center — the Baker Institute Center for Public Finance.”