Options for Responding to Short-Term Economic Weakness: The economy has recently been buffeted by several interlinked shocks, and the risk of recession is significantly elevated compared with what it is during normal economic conditions.
In response to a request from the Chairmen of the House and Senate Budget Committees, the Congressional Budget Office (CBO) has examined the potential role of fiscal policy efforts to expand aggregate demand in the current economic situation and the efficacy of various policy options to do so. This paper also examines options for dealing with the crisis in the home mortgage market, which has contributed to the overall economic weakness. It updates and expands upon a January 2002 CBO analysis of various tax options for stimulating the economy (see Economic Stimulus: Evaluating Proposed Changes in Tax Policy).
