In times of consecutive crises, is fiscal policy the answer by Otaviano Canuto (12/2012). “In recent weeks, fiscal policy – once the domain of policy wonks – has become part of dinner-table conversations. As Washington attemps to put its fiscal house in order, catchy metaphors from ‘fiscal cliff’ to ‘fiscal calamity’ to ‘austerity bomb’ (and even ‘hostage crisis’) permeate the media. Amidst the media spin and misnomers however, there lies a crucial debate. After all, fiscal policy, both through public spending and taxes, has a critical impact on long-run growth…At its core, fiscal policy is a balancing act. Increases in public spending must be offset with increases in tax revenue, deficits or grants.”
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