Countercyclical fiscal policy

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As a counter-cyclical fiscal policy (also counter-cyclical fiscal policy ) refers to the economic policy attempt by design of government revenues and expenditures on a stabilization of the economic cycle to work. In a recession , taxes and duties have to be reduced or expenditure on subsidies (e.g. investment grants) or government purchases increased. According to John Maynard Keynes, this should be done with the help of reserves or, in neo-Keynesianism, through deficit spending . This is intended to counter a lack of demand . Conversely, in boom phases for reserves, taxes have to be increased and expenditures reduced ( surplus saving ) in order to finance the expenditures of such a financial policy.

Keynesianism forms the economic theoretical basis of countercyclical financial policy . Keynes saw markets as inherently unstable. It is therefore the task of the state to stabilize the market. According to followers, this concept proved successful in combating the Great Depression in the United States . However, the Great Depression of the 1930s was based on the interaction of several factors, so that economic historians have different views on the effectiveness of countercyclical fiscal policy.

The neoliberalism took up the original idea of Keynes and sees such intervention to compensate for economic fluctuations only as justified and necessary to, if they are covered by reserves, that is not accompanied by new borrowing. Here are stimulus programs meant on subsidies as a flash in the pan, the long-term harm more than would use. According to the neoliberal view, subsidies distort competition through one-sidedness, thus preventing innovation and structural change and should therefore be dismantled.

Germany

In Germany , this was reflected in the Stability and Growth Act , which provided policy makers with instruments for an anti-cyclical policy. In boom phases, an economic adjustment reserve should be created in the state budget, which is then dissolved again in recession phases. An economic surcharge on income tax should dampen demand in the boom. The law also provided for investment grants.

However, this policy fell into disrepute in the 1970s because, despite anti-cyclical policies, economic growth slowed and unemployment rose in that decade. The main points of criticism were

  • the lack of “pigeonhole programs” and the associated delays in political action, which in the worst case came about at exactly the wrong time;
  • the lack of will on the part of politicians to cancel benefits once granted in the next upswing,
  • neglecting the negative effects of rising national debt due to an incorrectly conceived countercyclical policy.

At the beginning of the 1980s, anti-cyclical politics disappeared from the economic policy toolbox. However, according to the prevailing economic theoretical understanding, automatic stabilizers should help to compensate for cyclical fluctuations. At the latest in the course of the financial crisis from 2007 onwards , there was a worldwide rebirth of the countercyclical financial policy when the economic crisis was to be alleviated or overcome with tax cuts and increases in government spending.

The rules for the “ debt brake ” provide for an economically countercyclical government balance in addition to a structural deficit of no more than 0.35% of gross domestic product .

Web links

literature

  • Kronberger, Ralf: Effect of changes in the income tax rate on consumption and the economy due to the tax reform 2009/2010 In: Wirtschaftspolitische Blätter 2/2010, ISSN  1605-8704 , pp. 167-180 ( PDF file; 0.4 MB ).