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Recent and Near-Term Fiscal Policy: Headwind or Tailwind?

Author

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  • Brigid C. Meisenbacher
  • Daniel J. Wilson

Abstract

The federal government routinely uses government spending and taxes to help offset the highs and lows of the U.S. business cycle. While government spending typically increases during a recession, the magnitude of the fiscal expansion during the pandemic recession was outsized compared with the average historical pattern. This likely contributed to real economic growth and possibly inflation during the recovery. Over the next few years, U.S. fiscal policy is expected to be roughly neutral, providing neither a tailwind nor headwind to the overall economy.

Suggested Citation

  • Brigid C. Meisenbacher & Daniel J. Wilson, 2023. "Recent and Near-Term Fiscal Policy: Headwind or Tailwind?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, vol. 2023(09), pages 1-5, November.
    • Handle: RePEc:fip:fedfel:97291
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    References listed on IDEAS

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    1. Valerie A. Ramey, 2019. "Ten Years after the Financial Crisis: What Have We Learned from the Renaissance in Fiscal Research?," Journal of Economic Perspectives, American Economic Association, vol. 33(2), pages 89-114, Spring.
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