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November 15, 2011
CBO expects that, in 2012 under current law,
One criterion for evaluating fiscal policy options is the impact on the economy per dollar of budgetary cost. Based on that measure of cost-effectiveness:
Higher-impact policies
Lower-impact policies
Reductions in taxes and increases in government spending would produce short-term economic benefits—but without offsetting actions to reverse the accumulation of government debt, future output and future incomes would tend to be lower than they otherwise would have been.
If policymakers wanted to boost the economy in the near term while seeking to achieve long-term fiscal sustainability, a combination of policies would be required: changes in taxes and spending that would widen the deficit now but reduce it later in the decade.
CBO examined an illustrative set of potential changes in regulatory policies and other kinds of legislative actions (other than changes in fiscal policy) related to energy and the environment, the financial and health care sectors, and international trade.
CBO concludes: