Deficit Spending During Higher Inflation and Interest Rates: Implications for Debt Sustainability

This report focuses on federal fiscal policy—government spending and tax policy—and how its effects on the economy have changed (in practice or in perception) in light of higher inflation and interest rates.

This report outlines the ways in which expansionary fiscal policy (i.e., deficit spending) can be an important economic tool but can also have negative macroeconomic effects in the short and long run when applied persistently across the business cycle.