The Behavior of U.S. Deficits

45 Pages Posted: 5 Jul 2004 Last revised: 30 Jan 2022

See all articles by Robert J. Barro

Robert J. Barro

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: March 1984

Abstract

The tax-smoothing theory suggests that deficits would respond particularly to recession, temporarily high government spending, and anticipated inflation. My empirical estimates indicate that a relation of this type is reasonably stable in the U.S. since at least 1920. In particular, the statistical evidence does not support the idea that there has been a shift toward a fiscal policy that generates either more real public debt on average or that generates larger deficits in response to recessions. Further, the deficits for 1982-83 and projections for 1984 are consistent with the previous structure. The high values of these deficits reflect the customary response to substantial recession (interacting with big government) and to expected inflation.

Suggested Citation

Barro, Robert J., The Behavior of U.S. Deficits (March 1984). NBER Working Paper No. w1309, Available at SSRN: https://ssrn.com/abstract=321347

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