Go politics can change the content and timing of fiscal policy.
The guidelines for fiscal policy don't mention how the government spends its money.
The right amount of spending takes place at the right time.
The level of spending is the only thing that counts when it comes to stabilization objectives.
It does matter, whether federal expenditures are devoted to military hardware, urban transit systems, or tennis courts.
Our economic goals include full employment and price stability, but also a desirable mix of output, an equitable distribution of income, and adequate economic growth.
The content of total spending affects these other goals.
Keynes argued that government spending could not increase employment.
For a liberal viewpoint of the content increase in investment will increase consumption--that more wages will be spent on more beer of federal spending, go to the Center and boots whether the investment is useful or not.
He had to show that the increase in Budget and Policy Priorities at real income is not related to the primary outlay.
Pay men at www.cbpp.org.
If you can't do anything else, dig holes in the ground and fill them up again.
Center for Policy Analysis had the whole weight of the argument.
Keynesism was learned from the war.
Orthodoxy couldn't stand up anymore.
Maintaining a high and stable level of employment was accepted by the government.
Keynes was taken over by economists who built a new orthodoxy.
The question should have been changed once the point had been established.
We should argue about what the expenditure should be after we agree that government expenditure can maintain employment.
There are many alternatives to paying people to dig and fill holes in the ground.
With $3 trillion to spend each year, the federal government has great influence on short-run prices and employment but also on the mix of output, the distribution of income, and the prospects for long-run growth.
Fiscal policy helps shape the economy tomorrow.
Balance between the public and private sectors is one of the most debated issues in fiscal policy.
They fear that using government spending to fix the economy will lead to a larger public sector.
The government's GDP share has grown from 10 percent in 1930 to 19 percent today due to Keynesian fiscal policy.
This big-government bias doesn't exist in principle.
Keynes did not say that government spending was the only lever of fiscal policy.
Tax policy can be used to change consumer and investor spending.
Business confidence was so low in 1934 that tax increases in investment seemed unlikely.
In less desperate times, the choice of which fiscal tool to use is a political decision.
Bush favored tax cuts to bolster private spending, whereas Clinton favored increased government spending.
Fiscal policy must consider the specific content of spending within each sector in addition to choosing whether to increase public or private spending.
If we determine that stimulation of the private sector is preferable to additional government spending as a means of promoting full employment, then we should do so.
We have many options.
The May 1972 edition of the journal.
Permission was granted by the American Economic Association.
A different mix of consumption and investment is implied by each alternative.
Too much of the tax cuts went to high-income taxpayers.
They wanted a smaller tax cut for the rich, more tax relief for the poor, and more government spending on social programs.
After months of negotiation, they got a compromise that altered the mix of output and income more to their liking.
After they gained control of Congress, they got a more satisfying mix of output.
Full employment and price stability coincide with fiscal policy initiatives.
Government intervention to shift the AD curve will result in more disposable income, which will lead to a more desirable equilibrium.
Fiscal policy is meant to close GDP gaps.
Spending powers can be used to achieve desired outcomes.
Increasing govern the size of the GDP gap to compensate for changing price ment purchases, reducing taxes, and raising income levels are some of the tools of fiscal stimulation.
The AD shortfall is equal to the desired shift.
The size of the AD shortfall transfers is always less than the size of the fiscal stimulation purchases, increases in taxes, or cuts in income or restraint.
Changes in government spending and taxes can have an indirect effect on GDP by inducing a tent of GDP.
Policy affects the relative size of the public and private sector changes in government spending more powerful per dol tors as well as the mix of output in each sector.
The size of the 9 is affected by the slope of the AS curve.
The Democrats took control of Congress in 7.
There are numerical and graphing problems in the Student Problem Set at the back of the book.
You should know L01.
"crowding out" is how it works.
Who is responsible for the national debt?
The centerpiece of his fiscal policy was (2001-3).
Critics charged consequences of pump-priming.
Democrats pointed out that if the government spent more it would have a pro deficit.
The mix of output is what we start with.
The answers to the questions add that an impor would hurt the U.S. economy.
Growth was governed by the federal when George W. Bush was President.
A projected 10-year budget surplus of $5.6 from lower taxes will not be enough to offset the curtailing of trillion.
Washington con national saving and investment caused by mammoth budget fronts large annual budget deficits regardless of the cyclical deficits.
A growing number of people are saving.
The 10-year deficit is funded by borrowing from the rest of the $6.7 trillion Social Security surplus.
Bigger deficits mean lower future investment and government spending, contrary to the claims of the economy over the next decade.
Laura D'Andrea Tyson stimulates growth in a sluggish economy because of the Administration's tax cuts.
The argument is specious.
During the past three years, the economy may have needed more demand.
Permission was granted for this to be reproduced.
The economy's long-term right 2003 is likely to be reduced by copying these cuts.
The government's budget deficit is caused by tax cuts.
New macro problems may be created by larger deficits.
Spending guidelines and taxes are easy to understand.
To eliminate unemployment, use fiscalStimulus-stepped-up government spending, tax cuts, and macroeconomic increased transfers.
The federal budget is used to control the economy.
In a recession, the government can either cut taxes or increase spending.
The size of the result exceeds tax revenues.
The federal government had a huge budget deficit in 2004. leav exceeds government revenue in a given time period if the government spent more than $2 trillion but had less than $2 trillion in revenue.
A budget surplus is when revenues exceed outlays.
The 2004 deficit was the largest in over 30 years.
The figure shows that budget deficits have been common.
Budget deficits are the norm.
Since ary policies, the budget surplus has been achieved in only 4 years.
Austria had budget deficits and budget surpluses.
The U.S. budget has not been that large.
The budget deficits of 2003-5 were so remarkable because of their sudden emergence after a brief string of budget surpluses.
Keynes wouldn't have been surprised by it.
The budget deficits and surpluses are a result of countercyclical fiscal policy, as far as he was concerned.
Deficits can easily arise when the government uses fiscalStimulus to increase aggregate demand, just as fiscal restraint may cause a budget surplus.
If a budget deficit or surplus was necessary to shift aggregate demand to the desired equilibrium, so be it.
Keynes believed that a balanced budget would only be appropriate if the economy was in full employment.
The World View confirms that other nations agree with that conclusion.
People think Congress has control over spending and revenues.
Deficits and surpluses are not necessarily the result of fiscal policy decisions.
We need to take a closer look at how budget outlays and receipts are determined to understand the limits of budget management.
They don't start from scratch.
The budget line period used for accounting items reflects commitments made in the past.
$586 billion in Social Security benefits was included in the federal budget in FY 2008.
The budget supports the federal government.
Congress and the president can't change these expenditures in a given year.
"locked in" by previous legislative commitments.
This doesn't mean that you have to keep your word.
Policy tools are less effective if the budget is uncontrollable.
Consider the benefits of unemployment insurance.
The ance program was established in 1935 and provides for spending hikes for people who lose their jobs.
In 2002, outlays for unemployment benefits increased by $17 billion.
The increase in federal spending was not the result of new policy decisions.
Spending went up because more people lost their jobs.
In 2002, welfare benefits increased by $5 billion.
The increase in spending happened automatically when the economy got worse.
Welfare was used as more people lost jobs and used up their savings.
Keynes advocated this kind of fiscal policy.
New to individuals for which no spending is allowed during economic contractions.
No one has to pull the fiscal policy lever to inject more benefits.
There are automatic stabilizers on the revenue side of the federal budget.
If household incomes increase, a jump in consumer spending is likely.
Some demand-pull inflation might be created by the multiplier effects.
This inflationary pressure is lessened by the tax that automatically responds code.
You have to pay more taxes when you get more income.
Unemployment benefits have found their way to product markets because of income taxes.
Income taxes that are progressive are effective.
The table shows how sensitive the budget is.
Tax revenues decline by $38 billion when the GDP growth rate falls.
Unemployment benefits and other transfer payments increase by $2 billion as the economy slows.
Security benefits transfers are increasing.
The budget surplus in FY 2002 was roughly $30 billion smaller because of the recession.
The budget is affected by inflation.
As the price level increases, federal outlays increase.
Inflation-swollen tax receipts offset the added expenditure.
Social Security payroll taxes and corporate profit taxes rise with inflation.
The most important implication of Table 12.2 is that neither the president nor the Congress has complete control of the federal deficit.
Budget deficits and surpluses may come from both economic and policy.
President Reagan may have learned this better than anyone else.
He promised to balance the budget in 1980.
The 1981-82 recession caused the actual deficit to soar.
The president had to admit that actual deficits aren't the product of big spenders in Washington.
The persistence of huge deficits was explained by President George H. Bush.
The nation's unemployment rate went up by more than two percentage points during the 1990-91 recession.
The federal deficit was added by that setback.
The president had more luck with the deficit.
Automatic stabilizers kicked in as GDP growth accelerated and the unemployment rate fell.
The unemployment rate fell as the economy continued to grow.
The surge in the economy resulted in increased tax revenues, reduced income transfers, and a budget surplus in 1998.
The economy produced the first budget surplus in a generation.
The budget balance has both structural and cyclical components.
There was no policy intervention between FY 2000 and FY 2001.
As the economy fell into a recession, the cyclical surplus shrank.
The federal surplus was cut in half.
When GDP growth slows or inflation decreases, the deficit widens.
When GDP growth increases, the deficit shrinks.
It's clear that some other indicator is needed.
The impact of the business cycle on federal tax revenues and spending is reflected in the budget balance.
If the economy were at full employment, the structural deficit compares the revenues at full employment with actual receipts.
Budget distortions caused by cyclical conditions are eliminated by this technique minus expenditures at full employment.
There are still changes in fiscal policy.
The total, cyclical, and structural balances have behaved in recent years.
Consider what happened to the federal budget.
The federal Disentangling Deficits surplus was $236 billion in 2000.
Expansionary fiscal policies, such as tax cuts and spending hikes, are thought to have stimulated economic activity.
This wasn't the case.
The $108 billion swing in the budget accounted for all the structural deficits.
Changes in the structural deficit are not relevant.
The "full-employment," "high-employment," or "standardized" defi cit is also referred to as the structural defi cit.
The budget deficit complained about the expansion of public-works programs during the Great Depression.
The federal budget was unbalanced by these deficits.
Fiscal policy in 1933 had a positive effect on Hoover because he did not balance the budget during World War II.
The American Economic Association granted permission to use it.
The Great Depression was deepened by this fiscal restraint.
Fiscal policy was restrictive during the Great Depression, when fiscalStimulus was desperately needed, according to this measure.
Presidents Hoover and Roosevelt believed that the government should rein in its spending when tax revenues decline so as to keep the federal budget balanced.
It took a long time for the fiscal policy lever to be reversed.
Most people are alarmed by the budget deficits.
crowding out would be inevitable if the economy were operating at full employment.
We would be on the production possibilities curve at full employment.
If private-sector purchases are reduced, additional government purchases can occur.
If the economy is at full employment, crowding out is complete.
If the economy is in a recession.
Tax cuts can have crowding-out effects.
The 2001 tax cuts were intended to increase consumer spending.
cutbacks in either investment or government services will be forced by the added consumption at the production possibilities limit.
Professor Tyson was worried that this outcome would hurt America's strength.
Deficits are more appropriate at low levels of employment than at high levels.
Deficits are not necessarily too big even if crowding out occurs.
He believed that a crowding out of privatesector expenditure wasn't a bad thing.
Private spending is done if the economy is fully employed.
The increase in government ment expenditure moves the econ spending.
Education, health care, and transportation systems could accelerate long-term economic growth.
President George W. Bush thought differently.
He preferred a mix of output that was less public-sector and more private-sector.
He didn't see crowding out of government spending as a real loss.
The rate of interest is the mechanism that causes crowding out.
Financial markets are put under pressure when the government borrows more money.
Interest rates may rise as a result of that added pressure.
Households will be less willing to borrow more money if they do.
Businesses will be hesitant to borrow and invest.
Government borrowing costs go up as interest rates go up.
According to the Congressional Budget Office, a one-point rise in interest rates increases Uncle Sam's debt expenses by over $100 billion over 4 years.
Government budgets are less able to finance new projects because of higher interest costs.
How close the economy is to its productive capacity determines how much interest rates rise.
Interest rate crowding out isn't very likely if there is lots of excess capacity.
Interest rates and crowding out are likely to increase as capacity is approached.
They are the same as those for deficits.
The government takes in more revenue than it spends.
Uncle Sam hides the surplus under a mattress.
The sums involved are too large to put in a bank.
It would be nationalizing private enterprises if the government bought corporate stock with the budget surplus.
It can be spent on goods and services.
Save it if you have old debt.
The surplus can be wiped out by changing budget outlays or receipts.
There are important differences here.
Increased government spending reduces the surplus and enlarges the public sector.
Increasing income transfers or cutting taxes will put money into the hands of consumers and enlarge the private sector.
If Uncle Sam private-sector borrowing pays off some of his accumulated debt, households that were holding that debt will end up with more money.
Government borrowing if they use that money to buy goods and services.
People who haven't lent any money to Uncle Sam will benefit from the debt reduction.
Market interest rates are affected by the government's level of borrowing.
Consumers will be willing and able to purchase big-ticket items such as cars, appliances, and houses, thus changing the mix of output in favor of private-sector production.
The extent of crowding in depends on the state of the economy.
Even a surplus-financed tax cut might not be enough to lift consumer and investor confidence.
This was the case in 2001.
Taxpayers were slow to spend their tax-rebate checks and businesses were unpersuaded by low interest rates to increase their investment spending.
Accumulated began in debt.
The Continental Congress had to borrow money in order to pay the debt of the federal government.
The Congress tried to raise tax revenues and printed new money in order to buy food, tents, guns, and bullets.
The mechanisms for financing the war were failing by the winter of 1777.
The new nation was plunged into debt by the Continental Congress.
The fiscal agent of the U.S. government is the U.S. Treasury.
When necessary, the Treasury borrows funds to cover budget deficits.
People buy bonds because they pay interest and are safe.
The national debt is represented by the total stock of outstanding bonds.
It's the same as the sum notes issued by the U.S.
The national debt increases when there is a budget deficit.
The national debt can be reduced when a budget surplus occurs.