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Fiscal Consolidation in America: The Policy Options
Macro Economy Proceedings, Issue No. 6, March 2011 (PDF: 567kb)
Contents:
FISCAL CONSOLIDATION IN AMERICA: THE POLICY OPTIONS
ROSANNE ALTSHULER and BARRY BOSWORTH
This paper describes the options for reducing the U.S. fiscal deficit in the aftermath of the financial crisis. The first part of the paper assesses the economic outlook for the United States and the impact of the financial crisis on the medium-term fiscal balance of the federal government. Is there a short-term trade-off between the need for further fiscal stimulus and deficit reduction and how should it be managed? The second part of the paper examines the options for fiscal consolidation on both the expenditure and revenue sides of the budget.
This is an updated version of a paper presented at the November 2010 Nomura Foundation Conference titled "Fiscal Policy in the Post-Crisis World." The update takes into account the extension of the Bush-era tax cuts that was enacted in December 2010.
Rosanne Altsuler is professor of economics at Rutgers University and formerly served as Special Advisor to the Joint Committee on Taxation, chief economist for the President’s Advisory Panel on Federal Tax Reform, and director of the Urban-Brookings Tax Policy Center.
Barry Bosworth is Senior Fellow in the Economic Studies Program and holds the Robert V. Roosa chair in International Economics at the Brookings Institution. A former presidential advisor, he is an expert on fiscal and monetary policy.
