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Fiscal Policy, Past and Present

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  • Alan J. Auerbach

Abstract

This paper begins with a review of the current fiscal situation and the causes of its recent deterioration. As a guide to possible policy actions, it provides extensive estimates of past responses of revenues and expenditures at the federal and state and local level. Estimates at the federal level suggest that policy is responsive to both economic and fiscal conditions, and that this responsiveness may have grown over time. For states, economic conditions are less important, but responses to budget gaps are swifter. Equations for federal revenues and expenditures predict tax cuts and expenditure increases given current conditions, but of a considerably smaller magnitude than those initially proposed by President Bush. However, current circumstances are difficult to evaluate because of the enormous implicit entitlement liabilities that were much less significant in the past. This difficulty is but one of the problems facing policy prediction and evaluation.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10023.

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Date of creation: Oct 2003
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Publication status: published as Auerbach, Alan J. "Fiscal Policy, Past And Present," Brookings Papers on Economic Activity, 2003, v2003(1), 75-138.
Handle: RePEc:nbr:nberwo:10023

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  1. Matthew B. Canzoneri & Robert E. Cumby & Behzad T. Diba, 2002. "Should the European Central Bank and the Federal Reserve be concerned about fiscal policy?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, Federal Reserve Bank of Kansas City, pages 333-389.
  2. Alan J. Auerbach & Kevin Hassett, 1991. "Tax Policy and Business Fixed Investment in the United States," NBER Working Papers 3619, National Bureau of Economic Research, Inc.
  3. Martin Feldstein, 2002. "Commentary : Is there a role for discretionary fiscal policy?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, Federal Reserve Bank of Kansas City, pages 151-162.
  4. Auerbach, Alan J., 2002. "Taxation and corporate financial policy," Handbook of Public Economics, Elsevier, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 19, pages 1251-1292 Elsevier.
  5. repec:hrv:faseco:3353756 is not listed on IDEAS
  6. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 1(1), pages 19-46, January.
  7. Alberto Alesina & Silvia Ardagna & Roberto Perotti & Fabio Schiantarelli, 2000. "Fiscal Policy, Profits, and Investment," Boston College Working Papers in Economics, Boston College Department of Economics 504, Boston College Department of Economics.
  8. Jordi Gali & Roberto Perotti, 2003. "Fiscal Policy and Monetary Integration in Europe," NBER Working Papers 9773, National Bureau of Economic Research, Inc.
  9. Alan J. Auerbach, 1983. "Corporate Taxation in the United States," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 14(2), pages 451-514.
  10. Nigel Pain, 2002. "Fiscal Incentives, European Integration and the Location of Foreign Direct Investment," NIESR Discussion Papers, National Institute of Economic and Social Research 147, National Institute of Economic and Social Research.
  11. Christina D. Romer & David H. Romer, 1994. "What Ends Recessions?," NBER Working Papers 4765, National Bureau of Economic Research, Inc.
    • Christina D. Romer & David H. Romer, 1994. "What Ends Recessions?," NBER Chapters, in: NBER Macroeconomics Annual 1994, Volume 9, pages 13-80 National Bureau of Economic Research, Inc.
  12. Alan J. Auerbach, 1986. "Tax Reform and Adjustment Costs: The Impact on Investment and Market Value," NBER Working Papers 2103, National Bureau of Economic Research, Inc.
  13. Jagadeesh Gokhale & Kent Smetters, 2003. "Fiscal and generational imbalances: new budget measures for new budget priorities," Policy Discussion Papers, Federal Reserve Bank of Cleveland, Federal Reserve Bank of Cleveland, issue Dec.
  14. Fumio Hayashi, 2002. "Commentary : Is there a role for discretionary fiscal policy?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, Federal Reserve Bank of Kansas City, pages 163-172.
  15. Auerbach, Alan J, 1983. "Taxation, Corporate Financial Policy and the Cost of Capital," Journal of Economic Literature, American Economic Association, vol. 21(3), pages 905-40, September.
  16. Auerbach, A.J. & Hines, Jr.J.R., 1988. "Investment Tax Incentives And Frequent Tax Reforms," Papers, Princeton, Woodrow Wilson School - Public and International Affairs 135, Princeton, Woodrow Wilson School - Public and International Affairs.
  17. Alan J. Auerbach, 2002. "Is there a role for discretionary fiscal policy?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, Federal Reserve Bank of Kansas City, pages 109-150.
  18. Roberto Perotti, 1999. "Fiscal Policy In Good Times And Bad," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(4), pages 1399-1436, November.
  19. Henning Bohn, 1998. "The Behavior Of U.S. Public Debt And Deficits," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 113(3), pages 949-963, August.
  20. Alan J. Auerbach, 1996. "Dynamic Revenue Estimation," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 10(1), pages 141-157, Winter.
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