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U.S. fiscal policy: headwind or tailwind?

Author

Listed:
  • Brian Lucking
  • Daniel J. Wilson

Abstract

Aggregate state, local, and federal fiscal policy was expansionary during the Great Recession and the initial stages of recovery, providing a tailwind to economic growth. Federal fiscal policy in particular was more expansionary than usual, according to a historical analysis, even when the weakness of the economy is taken into account. However, during the past year, aggregate government budgetary policy has reversed course. Over the next few years, as federal fiscal policy shifts toward austerity, it is likely to be a headwind against economic growth.

Suggested Citation

  • Brian Lucking & Daniel J. Wilson, 2012. "U.S. fiscal policy: headwind or tailwind?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue july2.
  • Handle: RePEc:fip:fedfel:y:2012:i:july2:n:2012-20
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    File URL: http://www.frbsf.org/publications/economics/letter/2012/el2012-20.html
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    References listed on IDEAS

    as
    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "The Aftermath of Financial Crises," American Economic Review, American Economic Association, pages 466-472.
    2. Mary Daly & Bart Hobijn & Aysegul Sahin & Robert Valletta, 2011. "A Rising Natural Rate of Unemployment: Transitory or Permanent?," Tinbergen Institute Discussion Papers 11-160/3, Tinbergen Institute.
    3. Brian Lucking & Daniel J. Wilson, 2012. "U.S. fiscal policy: headwind or tailwind?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue july2.
    4. Galina Hale & Elliot Marks & Fernanda Nechio, 2012. "Are U.S. corporate bonds exposed to Europe?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue jun4.
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    Cited by:

    1. John C. Williams, 2012. "The economic outlook and challenges to monetary policy," Speech 110, Federal Reserve Bank of San Francisco.
    2. repec:fip:fedfsp:y:2012:i:july23:n:2012-22 is not listed on IDEAS
    3. repec:fip:fedfsp:y:2012:i:sep24 is not listed on IDEAS
    4. John C. Williams, 2012. "The outlook and monetary policy challenges," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue july23.

    More about this item

    Keywords

    Fiscal policy;

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