The Economic Crisis and the Fiscal Crisis: 2009 and Beyond

In 2009, the federal deficit will be larger as a share of the economy than at any time since the 1940s. After 2009, we project an average deficit of $1 trillion per year for the next 10 years, under optimistic assumptions. The longer-run picture is even bleaker, with a fiscal gap of 7-9 percent of GDP -- between $1 trillion and $1.3 trillion annually in current dollars. Recent trends in credit default swap markets suggest that although fiscal policy problems are usually described as medium- and long-term issues, these problems may be upon us much sooner than previously expected.

Distributional Effects of Tax Provisions in the Stimulus Bill

The "American Recovery and Reinvestment Act of 2009" will cut taxes for 97 percent of all tax units in 2009, raising their after-tax income by an average of 2 percent. The biggest gains will go to people in the bottom fifth of the income distribution, who will see their after-tax income jump by an average 4.7 percent. Nearly half of that gain will come from the Making Work Pay credit and another quarter will result from the increased refundability of the child tax credit. Detailed tables show the act’s effects by cash categories and income percentiles.

Stimulus Bill Report Card

Final grades are in for the "American Recovery and Reinvestment Act of 2009," signed into law by President Obama on February 17. Check them out here. You can also use our Stimulus page to link to the act itself, the conference report on the final bill, and revenue and cost estimates from the Joint Committee on Taxation and the Congressional Budget Office.