Structural change in federal spending and deficits: Legislative and cyclical influences
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This paper analyzes the behavior of federal expenditures and budget deficits since 1955. It is found that growth in these series is well described by two simple step functions allowing for three discrete increases in the means of the variables. When adjusted for the changes in means, both series are stationary with no significant time trend. It is found that the increases in means are associated with government attempts to implement countercyclical fiscal policy during recessions. Also, the increases in means coincide well with specific legislative acts which increased the budgetary power of individual members of Congress and ended the ability of the president to use impoundment as a substitute for a line-item veto.
KeywordsInternational Economic Public Finance Time Trend Step Function Significant Time
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