Hutchins Center Fiscal Impact Measure

The Hutchins Center Fiscal Impact Measure shows how much fiscal policy adds to or subtracts from overall economic growth. Use the graph below to explore the total quarterly fiscal impact as well as its components: taxes and spending at the federal, state and local levels. (Methodology »)


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 from Bureau of Economic Analysis data.

Hutchins Center on Fiscal & Monetary Policy

By Louise Sheiner and David Wessel

Spending and tax policies at the local, state and federal level—which restrained overall economic growth from 2011 through 2014—neither stimulated nor depressed the pace of U.S. economic growth in the fourth quarter, according to the latest reading on the Hutchins’ Fiscal Impact Measure.

The Hutchins’ FIM has been hovering near zero for the past few quarters, suggesting that local, state and federal fiscal policies are neither adding to nor subtracting from the change in gross domestic product lately.

A few other highlights from the most recent update to the FIM:

  • In the fourth quarter, the FIM was +0.06, which means that 0.06 percentage points of the 2.1 percent increase in gross domestic product came from the government sector. The fourth-quarter reading was essentially unchanged from the third quarter. The four-quarter moving average was 0.06.
  • The slightly positive reading on the FIM in the fourth quarter reflected an uptick in spending by state and local governments. The combined effect of federal purchases of goods and services as well as tax and benefits at all levels of government was close to zero.

The FIM illustrates the combined effect of local, state and, particularly, federal fiscal policy from 2008 through 2010—the Great Recession and the ensuing slow recovery—added substantially to GDP growth, in part because of the American Recovery and Reinvestment Act, the fiscal stimulus of the Obama administration. The FIM peaked at 3.04 in the second quarter of 2009. But belt-tightening from 2011 through 2014, government subtracted from overall economic growth. The FIM fell below zero for several quarters in a row.

If the Trump administration and Congress agree on major tax cuts and change—increases or decreases—in federal spending, the FIM will provide a gauge of their near-term effects on GDP growth.

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