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Fiscal Policy, Past and Present

  • Alan J. Auerbach

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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File URL: http://www.nber.org/papers/w10023.pdf
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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
Note: EFG PE
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  1. Auerbach, Alan J & Hines, James R, Jr, 1988. "Investment Tax Incentives and Frequent Tax Reforms," American Economic Review, American Economic Association, vol. 78(2), pages 211-16, May.
  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. 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.
  4. Fumio Hayashi, 2002. "Commentary : Is there a role for discretionary fiscal policy?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 163-172.
  5. 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.
  6. Alan J. Auerbach, 2001. "Taxation and Corporate Financial Policy," NBER Working Papers 8203, National Bureau of Economic Research, Inc.
  7. Alberto Alesina & Silvia Ardagna & Roberto Perotti & Fabio Schiantarelli, 2002. "Fiscal Policy, Profits, and Investment," American Economic Review, American Economic Association, vol. 92(3), pages 571-589, June.
  8. Jordi GalÌ & Roberto Perotti, 2003. "Fiscal policy and monetary integration in Europe," Economic Policy, CEPR;CES;MSH, vol. 18(37), pages 533-572, October.
  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. Jagadeesh Gokhale & Kent Smetters, 2003. "Fiscal and generational imbalances: new budget measures for new budget priorities," Policy Discussion Papers, Federal Reserve Bank of Cleveland, issue Dec.
  11. Hubert, Florence & Pain, Nigel, 2002. "Fiscal Incentives, European Integration and the Location of Foreign Direct Investment," Manchester School, University of Manchester, vol. 70(3), pages 336-63, June.
  12. Alan Auerbach, 2002. "Is There a Role for Discretionary Fiscal Policy?," NBER Working Papers 9306, National Bureau of Economic Research, Inc.
  13. Alan J. Auerbach, 1996. "Dynamic Revenue Estimation," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 141-157, Winter.
  14. Martin Feldstein, 2002. "Commentary : Is there a role for discretionary fiscal policy?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 151-162.
  15. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  16. Roberto Perotti, 1999. "Fiscal Policy In Good Times And Bad," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1399-1436, November.
  17. Auerbach, Alan J, 1989. "Tax Reform and Adjustment Costs: The Impact on Investment and Market Value," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(4), pages 939-62, November.
  18. repec:hrv:faseco:3353756 is not listed on IDEAS
  19. 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, pages 333-389.
  20. Henning Bohn, 1998. "The Behavior Of U.S. Public Debt And Deficits," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 949-963, August.
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