Publication Date: January 2008
Publisher: Center on Budget and Policy Priorities (Washington, D.C.)
Research Area: US Fiscal Future
Keywords: Federal budget; Recession; Unemployment rate; Economic projections
Recent evidence that the economy has weakened significantly has sparked discussion of possible fiscal stimulus measures. To be effective, such measures must be timely, targeted, and temporary. Some policymakers appear to assume that tax cuts are inherently stimulative, while spending increases are inherently less desirable as economic stimulus. Such assumptions do not withstand scrutiny. Both spending measures and tax cuts can be effective — or ineffective — as stimulus, depending on their nature and design.