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Fiscal policy issues in the United States

Brad DeLong, professor of economics | September 12, 2013

At the end of the 2008, the seriousness of the financial crisis and the resulting collapse in production and employment coupled with the Federal Reserve’s exhaustion of its traditional monetary policy-management took, the open-market operation, raised the possibility that the U.S. government should consider using activist expansionary fiscal policy as a stabilization-policy tool.

Doubters offered many reasons — some clearly invalid ex ante, others potentially valid — why such resort to activist expansionary fiscal policy as a stabilization-policy tool might be ineffective or harmful.

How has our view of the validity of these doubts changed over the past six years? How has our view of the power of expansionary fiscal policy — especially when monetary policy is at and committed to remain at the zero lower bound — changed over the past six years?

What are the current objections to more aggressive activist expansionary fiscal policy as a stabilization-policy than is contained in the current baseline? And what do we not know that we need to know in order to properly evaluate such policies?

A talk I have not yet written up. But here is a link to the slides…

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