Economics Working Paper 18117
Abstract: This paper reexamines empirical research on fiscal stimulus packages which were enacted into law and implemented around the time of the Financial Crisis and Great Recession of 2007-2009. The programs include federal transfers to the states for infrastructure building, tax rebates, temporary income tax cuts, cash for clunkers, and financial aid for first-time homebuyers. My empirical findings show that these fiscal actions did little or nothing to stimulate the economy. Some of the negative ramifications of these policies continue as the federal budget deficit remains large and is expected to grow larger. The paper also considers the impact of multi-year fiscal consolidation plans to reduce the deficit.