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An Update on the Economic Crisis and the Fiscal Crisis: 2009 and Beyond

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Publication Date: June 2009

Publisher(s): Tax Policy Center

Author(s): Alan J. Auerbach; William G. Gale

Special Collection: John D. and Catherine T. MacArthur Foundation

Topic: Economics (Economic theory)

Keywords: Federal Budgets & Fiscal Policy; Tax Distribution and Economic Trends; State and Local Issues; Economic Stimulus

Type: Report

Abstract:

his paper reviews recent economic events and their impact on U.S. fiscal performance and prospects. We highlight the historic nature of the 2009 budget outcomes, the unsustainability of plausible ten-year budget projections, and the increasingly dire long-term fiscal problem. These conditions leave federal policy makers with difficult choices. Over the next several years, as the recession ends and the economy recovers, policy makers will face a delicate balancing act between encouraging economic recovery and establishing fiscal sustainability. Even if a successful recovery ensues, however, medium-term and long-term fiscal problems have become increasingly urgent.