We examine the interplay of the economy and state and local budgets by developing and examining two measures of fiscal policy: the high-employment budget and fiscal impetus. We find that a 1 percentage point increase in cyclical GDP results in a 0.1 percentage point increase in NIPA-based net...

This paper uses a DSGE model to examine the effects of an expansion in government spending in a liquidity trap. If the liquidity trap is very prolonged, the spending multiplier can be much larger than in normal circumstances, and the budgetary costs minimal. But given this "fiscal free lunch,"...

We examine the effects of the economy on the government budget as well as the effects of the budget on the economy. First, we provide measures of the effects of automatic stabilizers on budget outcomes at the federal and state and local levels. For the federal government, the deficit increases...