for one of my courses, I decided that it would be useful to calculate how the degree of macro-level automatic stabilization due to the Federal budget has changed over time. (That is, it used to be that if the US economy goes into recession, the deficit automatically would rise, moderating the slump.) In my simple calculations based on data supplied by the Congressional Budget Office (http://www.cbo.gov/showdoc.cfm?index=1485&sequence=0, table 2), automatic stabilization disappeared around 1989 and actually became negative.
This helps to explain the steepness of the 2001 recession (until it was stopped by active & monetary fiscal policy) and does not bode well for the next recession.
Does anyone know of more serious (less back-of-the-envelope) research on this?
Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine
