Re: US econ. stability

["Niggle, Christopher" <Christopher_Niggle@xxxxxxxxxxxx>]

 Jim, other interested colleagues: Alan J. Auerbach's "Is there a role for
discretionary fiscal policy?" in the FRBKC's Symposium Volume "Rethinking
Stabilization Policy" 2002, available online from FRBKC, presents his
estimates of the effectiveness of the tax system as a stabilizer and finds
it to be still about as effective in the 1990s as previously.  Auerbach also
reviews some literature.  I haven't had time to look at it closely yet.

chris

JIM: please let me know if you get this.


-----Original Message-----
From: Devine, James
To: PKT (E-mail)
Sent: 3/28/03 1:41 PM
Subject: US econ. stability



for one of my courses, I decided that it would be useful to calculate
how the degree of macro-level automatic stabilization due to the Federal
budget has changed over time. (That is, it used to be that if the US
economy goes into recession, the deficit automatically would rise,
moderating the slump.) In my simple calculations based on data supplied
by the Congressional Budget Office (
http://www.cbo.gov/showdoc.cfm?index=1485
<http://www.cbo.gov/showdoc.cfm?index=1485&sequence=0> &sequence=0,
table 2), automatic stabilization disappeared around 1989 and actually
became negative.

This helps to explain the steepness of the 2001 recession (until it was
stopped by active & monetary fiscal policy) and does not bode well for
the next recession.

Does anyone know of more serious (less back-of-the-envelope) research on
this?

please answer off-list, since I currently don't read my PKT mail.

Jim Devine jdevine@xxxxxxx &  http://bellarmine.lmu.edu/~jdevine
<http://bellarmine.lmu.edu/~jdevine>