Working Paper: NBER ID: w14725
Authors: Alan J. Auerbach
Abstract: To many observers, the current recession provides compelling circumstances for renewed fiscal policy activism. But the strong support for fiscal policy intervention reflects a renewed belief in policy activism that had already appeared before the present crisis. However, the recent debate about possible fiscal policy interventions suggests that we are still relying on the approaches to discretionary policy used in past periods of policy activism. It is not surprising that there have been few advances in discretionary policy design, given the lack of favor such policy suffered over many years. But if we are going to practice fiscal discretionary policy on a large scale, then more attention to policy design is sorely needed.
Keywords: No keywords provided
JEL Codes: E62
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Fiscal stimulus package proposed in response to the 2008 recession (E65) | Significant shift towards aggressive fiscal intervention compared to previous recessions in 1982 and 1990 (E65) |
| Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982 (H20) | Substantial impacts on the primary surplus (H69) |
| Introduction of bonus depreciation and other tax incentives during previous recessions (E65) | Causal link between fiscal policy design and business investment behavior (H32) |
| Temporary investment incentives (G31) | Potential destabilizing effects leading to reduced investment prior to their enactment (H32) |
| Current fiscal policy activism (E62) | Response to the severity of the recession and limitations of monetary policy (E63) |