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For immediate release: August 4, 2010

Dallas Fed: Fiscal Stimulus Provides Short-Term Boost but Exacerbates Fiscal Imbalances

DALLAS—Evidence suggests the stimulus plan has provided a short-term economic boost, though it’s unclear how large this boost has been, according to the latest issue of the Federal Reserve Bank of Dallas’ Economic Letter.

In “Can the Nation Stimulate Its Way to Prosperity?” senior economist Jason Saving finds the stimulus plan likely boosted U.S. economic growth to some degree in the short run. 

“Overall, the stimulus plan does fulfill the ‘targeted and timely’ criteria moderately well,” Saving writes.

He also notes that it’s difficult to determine precisely where the economy would be without the stimulus.

“Simply put, there’s no way to know how badly the economy would have performed in the absence of fiscal stimulus and no way to prove how many jobs would have existed without stimulus,” Saving writes.

What is clear, according to Saving, is that stimulus funds have exacerbated near-term fiscal imbalances. Rising deficits raise concerns about private-sector borrowing and future tax burdens, he states.

“Painful choices—among them, withdrawing fiscal stimulus over time—will be necessary as the economy recovers if these imbalances are to be corrected,” Saving asserts.


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