Working Paper: NBER ID: w15784
Authors: Joshua Aizenman; Gurnain Kaur Pasricha
Abstract: This note shows that the aggregate fiscal expenditure stimulus in the United States, properly adjusted for the declining fiscal expenditure of the fifty states, was close to zero in 2009. While the Federal government stimulus prevented a net decline in aggregate fiscal expenditure, it did not stimulate the aggregate expenditure above its predicted mean. We discuss the implications of limitations on states' ability to run deficits for the design of fiscal stimulus at the federal level. We devote particular attention to intertemporal moral hazard concerns in a federal fiscal system, and ways to address these concerns.
Keywords: Fiscal Stimulus; US Economy; Federal Expenditure; State Expenditure; Financial Crisis
JEL Codes: E62; F36; H5; H77
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Federal expenditures rose (H59) | State and local expenditures fell (H76) |
| Federal stimulus (H81) | Consolidated fiscal expenditure did not exceed predicted levels (H68) |
| Federal stimulus (H81) | Minimal overall impact on fiscal expenditure (H69) |
| Adverse wealth effects and reduced private sector credit access (G51) | Limited net fiscal stimulus (E62) |
| Federal expenditure stimulus (H59) | Offset negative fiscal stimulus from state and local governments (H79) |