The Four Pieces of Effective Fiscal Stimulus: Unemployment Insurance, State Relief, Food Stamps, and Tax Refunds

Publication Date: January 2008

Publisher: Center on Budget and Policy Priorities (Washington, D.C.)

Author(s):

Research Area: Economics

Keywords: Federal budget; Recession; Unemployment rate; Economic projections

Type: Report

Abstract:

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.