Recognition lag
- time between a recession beginning and knowing it is happening (why?)
- time it takes to recognize the price level has risen
- democratic government is slow
- it's supposed to be!
- time between the action being taken and the desired affects taking place
- tax changes are relatively fast
- spending changes are not (example: public works)
- (consequence: tax changes a more common tool)
- government dollars tend to create constituencies for those dollars
- political incentives (reelection)
- actions may be taken in the guise of fiscal policy
- political business-cycles
- political uncertainty (fear of future policy reversals)
- offsetting state and local finance
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