The causal relation between Federal expenditures and receipts

Any proposal to reduce the federal budget deficit that does not deal with the basic cause of deficit growth will likely result in no permanent decrease in deficits. Because all proposed solutions try to alter federal spending or receipts, these 2 elements of deficits are examined for evidence of int...

Full description

Saved in:
Bibliographic Details
Published in:Southern economic journal 1986, Vol.52 (3), p.617-629
Main Authors: Manage, Neela, Marlow, Michael L.
Format: Article
Language:English
Subjects:
Budget deficits
Causality
debt
Deficit financing
depense publique
dette
deudas
Economic theory
Federal
Federal budget deficit
Federal budgets
finances publiques
Funding
gastos publicos
Government
Government relations
Government spending
hacienda publica
impot
impuestos
public expenditure
public finance
Receipts
Relations
Revenue
Statistical analysis
Studies
Tax increases
Taxes
Citations: Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Any proposal to reduce the federal budget deficit that does not deal with the basic cause of deficit growth will likely result in no permanent decrease in deficits. Because all proposed solutions try to alter federal spending or receipts, these 2 elements of deficits are examined for evidence of interdependence using the notion of Granger (1969) causality. The Granger causality test is applied to annual observations on government outlays and budget receipts for the period 1929-1982, using data obtained from the Office of Management and Budget. Observations for 1941-1946 are excluded from the sample. Analysis shows that 7 of the 12 (58%) cases indicate bidirectional causality between receipts and outlays. The remaining 5 (42%) cases indicate a unidirectional causal link running from budget receipts to budget outlays. These results suggest that proposals that call for tax increases to close the federal budget deficit do not necessarily offer permanent solutions to underlying fiscal problems.
ISSN:0038-4038
2325-8012
DOI:10.2307/1059261