How does the budget process make fiscal policy difficult to implement? Instructi

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How does the budget process make fiscal policy difficult to implement?

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The budget process begins a year and a half before the budget is implemented, making it difficult to know what type of fiscal policy will be needed. Many budget decisions are made for political reasons (few politicians would vote for a tax increase in an election year even if such an increase were needed). Nearly two-thirds of the budget is mandated by federal programs and cannot be easily changed. Automatic stabilizers are countercyclical; they offset government fiscal policy. Congress employs commercial economists who are biased toward the market. How does the budget process make fiscal policy difficult to implement?

Explanation / Answer

The budget process begins a year and a half before the budget is implemented, making it difficult to know what type of fiscal policy will be needed.

Many budget decisions are made for political reasons (few politicians would vote for a tax increase in an election year even if such an increase were needed).

Nearly two-thirds of the budget is mandated by federal programs and cannot be easily changed.

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