Hutchins Center Fiscal Impact Measure

July 28, 2023

Hutchins Center Fiscal Impact Measure Contribution of Fiscal Policy to Real GDP Growth Components of Fiscal Policy Contribution to Real GDP Growth

  • Four-quarter moving average
  • Quarterly fiscal impact
  • Federal spending on goods and services
  • State and local spending on goods and services
  • Taxes and benefit programs

Source: Hutchins Center calculations and projections using data from
Bureau of Economic Analysis (historical) and the Congressional Budget Office (projections)

Hutchins Center on Fiscal & Monetary Policy

The Hutchins Center Fiscal Impact Measure shows how much local, state, and federal tax and spending policy adds to or subtracts from overall economic growth, and provides a near-term forecast of fiscal policies’ effects on economic activity.


By Eli Asdourian, Louise Sheiner, and Lorae Stojanovic

Fiscal policy decreased U.S. GDP growth by 0.4 percentage point in the second quarter of 2023, the Hutchins Center Fiscal Impact Measure (FIM) shows. The FIM translates changes in taxes and spending at federal, state, and local levels into changes in aggregate demand, illustrating the effect of fiscal policy on real GDP growth. GDP increased at an annual rate of 2.1% in the second quarter of 2023, according to the government’s latest estimate.

The waning effects of transfer programs lowered the FIM by 1.8 percentage points, while the decline in tax collections over the last year raised the FIM by 0.8 percentage point.

As the FIM shows, fiscal policy provided significant support to economic growth when large swaths of the economy were shut down in 2020 during the COVID-19 pandemic. The FIM turned negative in the second quarter of 2021 as fiscal support waned. The negative impulse from fiscal policy peaked in mid-2022 and has since diminished.

We expect the FIM to be negative through the end of our forecast period, reflecting the waning effects of CHIPS/IRA, the resumption of student loan payments and federal purchases that are rising more slowly than potential GDP. (This projection assumes that discretionary spending increases at the rate specified in the recent debt ceiling agreement between the White House and Congress.) We have not included an estimate of the effects of a potential government shutdown. We estimate that each week of a shutdown would lower fourth quarter GDP growth by about 0.2 percentage point, not including any effects on overall business or consumer confidence. This effect on Q4 GDP growth would be reversed in the first quarter of 2024.

The FIM tracks the influence of fiscal policy on GDP growth rates. It measures only the direct impacts of fiscal policy on demand (including both discretionary fiscal policy and automatic stabilizers). It doesn’t include fiscal multipliers nor any potential effects of fiscal policy on aggregate supply. For an analysis that includes multipliers, as well as a more detailed breakdown of the components of the FIM, read our explainer on how pandemic-era fiscal policy affects the level of GDP, which includes a comparison of actual GDP with our estimate of what GDP might have been had fiscal policy failed to respond to the pandemic.»

For more on the FIM, see our methodology ». You can also read our Guide to the FIM ».