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The Budgetary Implications of Higher Federal Reserve Board Interest Rates

Author

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  • Dean Baker

Abstract

This paper explores the potential impact of the Federal Reserve Board’s decision on interest rates on the budget deficit. The first part recounts the history of the 1990s surplus, correcting the widely held misunderstanding that this surplus was achieved by the Clinton administration’s tax increases and spending cuts. The second part examines the direct and indirect impact of Fed rate hikes on the federal budget deficit. The third part examines the impact of Fed rate hikes on state budgets.

Suggested Citation

  • Dean Baker, 2015. "The Budgetary Implications of Higher Federal Reserve Board Interest Rates," CEPR Reports and Issue Briefs 2015-07, Center for Economic and Policy Research (CEPR).
    • Handle: RePEc:epo:papers:2015-07
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    More about this item

    Keywords

    jobs; employment; interest rates; unemployment; economic policy; Fed;
    All these keywords.

    JEL classification:

    • E - Macroeconomics and Monetary Economics
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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