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Fiscal Policy in the Longer Term

Published online by Cambridge University Press:  26 March 2020

Ray Barrell
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Extract

Governments are important players in many parts of the economy, and at present perhaps the most visible is the balance they set between taxing and spending. Tax and spending polices are in part designed to redistribute resources between individuals, but they can also be used to redistribute resources over time. Governments can also use tax and spending policies to sustain or restrain economic activity, and in most countries a case can be made for using active fiscal policy in periods of clear economic distress, or in periods when it would be useful to restrain imbalances that can lead to financial crises. As a result it is difficult to gauge the appropriate stance of policy. Short-run problems have to be balanced against longer-term needs, and mistakes are common. In the UK, for instance, in the six years up until 2008 the balance of policy was perhaps too loose, whilst over the next five years it is probably too tight, even though deficits are projected to be higher than they were before 2009.

Type
Commentary
Information
National Institute Economic Review , Volume 217 , July 2011 , pp. F4 - F10
Copyright
Copyright © 2011 National Institute of Economic and Social Research

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Footnotes

∗

I would like to thank Jonathan Portes, Dawn Holland and Simon Kirby for their comments. Any errors remain mine.

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