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Fiscal policy boosted U.S. GDP growth by 8.5 percentage points at an annual rate in the first quarter of 2021, 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 rose at an annual rate of 6.4% in the first quarter, according to the government’s latest estimate.
The boost to economic growth in the first quarter from fiscal policy is largely the result of two rounds of rebate checks (the $600 per person from legislation enacted in December that was paid in January, and the $1,400 per person from the American Rescue Plan Act that was paid in the last few weeks of March). An uptick in purchases by the federal government, reflecting in part spending on vaccines and processing of Paycheck Protection Program loans, also boosted economic activity.
Author(s): Manuel Alcala Kovalski, Sophia Campbell, Tyler Powell, Louise Sheiner
Publication Date: 1 June 2021 (most recent data update)
Publication Site: Brookings