'Timely, Targeted, and Temporary?' an Analysis of Government Expansions Over the Past Century
32 Pages Posted: 12 Jul 2018
Date Written: 01/13/2015
John Maynard Keynes suggested that government should undertake a temporary surge in deficit-financed spending during times of economic need. Today, countercyclical fiscal stimulus spending is believed to be most potent when programs are timely, targeted, and temporary. However, history has shown that fiscal stimulus policies have a dismal record with respect to the "three Ts." This paper examines episodes of major government expansion during economic emergencies along with the contraction, or lack thereof, once the emergency has passed. We analyze broad measures such as federal government spending, both in absolute terms and as a percentage of GDP. We conclude that most countercyclical spending programs do not follow the three Ts, which may undermine their ultimate effectiveness and explain why many economists are skeptical of such policies.
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