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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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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. Alan J. Auerbach, 1982. "Taxation, Corporate Financial Policy and the Cost of Capital," NBER Working Papers 1026, National Bureau of Economic Research, Inc.
  2. Alesina, Alberto F & Ardagna, Silvia & Perotti, Roberto & Schiantarelli, Fabio, 1999. "Fiscal Policy, Profits and Investment," CEPR Discussion Papers 2250, C.E.P.R. Discussion Papers.
  3. 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.
  4. 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.
  5. Jordi GalÌ & Roberto Perotti, 2003. "Fiscal policy and monetary integration in Europe," Economic Policy, CEPR;CES;MSH, vol. 18(37), pages 533-572, October.
  6. Auerbach, A.J. & Hines, Jr.J.R., 1988. "Investment Tax Incentives And Frequent Tax Reforms," Papers 135, Princeton, Woodrow Wilson School - Public and International Affairs.
  7. Henning Bohn, 1998. "The Behavior of U. S. Public Debt and Deficits," The Quarterly Journal of Economics, Oxford University Press, vol. 113(3), pages 949-963.
  8. Auerbach, Alan J. & Hassett, Kevin, 1992. "Tax policy and business fixed investment in the United States," Journal of Public Economics, Elsevier, vol. 47(2), pages 141-170, March.
  9. Nigel Pain, 2002. "Fiscal Incentives, European Integration and the Location of Foreign Direct Investment," NIESR Discussion Papers 195, National Institute of Economic and Social Research.
  10. Jordi Gali & Roberto Perotti, 2003. "Fiscal Policy and Monetary Integration in Europe," NBER Working Papers 9773, National Bureau of Economic Research, Inc.
  11. Auerbach, Alan J., 2002. "Taxation and corporate financial policy," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 19, pages 1251-1292 Elsevier.
  12. 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.
  13. Alan J. Auerbach, 1996. "Dynamic Revenue Estimation," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 141-157, Winter.
  14. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  15. 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.
  16. Alan Auerbach, 2002. "Is There a Role for Discretionary Fiscal Policy?," NBER Working Papers 9306, National Bureau of Economic Research, Inc.
  17. repec:hrv:faseco:3353756 is not listed on IDEAS
  18. 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.
  19. 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.
  20. Roberto Perotti, 1999. "Fiscal Policy in Good Times and Bad," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1399-1436.
  21. 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.
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