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Working Paper
The Road of Federal Infrastructure Spending Passes Through the States
Because federal infrastructure spending largely takes the form of grants to state governments, the macroeconomic impact of such packages depends on the share of federal grants that “passes through” to actual infrastructure spending done by states. A low degree of pass-through would tend to mute the economic impact from federal grants, reflecting a crowd-out effect on state spending. We first revisit Knight’s (2002) influential finding of near-zero pass-through (perfect crowd out) of federal highway grants. That result is found to be specification-sensitive and is reversed completely in ...
Briefing
The Persistence of Financial Distress
Household financial distress is pervasive. Is this pattern driven by a small share of individuals experiencing persistent distress, by the majority facing more occasional distress, or something in between? Recent research indicates that over a lifetime, financial distress is unlikely for most but very persistent for some. Models that account for the uncertain evolution of consumers' earnings over time and the availability of formal consumer bankruptcy cannot explain ? by themselves ? this pattern, but a model that also allows for informal default and variation in consumers' willingness to ...
Discussion Paper
Expecting the Unexpected: Job Losses and Household Spending
Unemployment risk constitutes one of the most significant sources of uncertainty facing workers in the United States. A large body of work has carefully documented that job loss may have long-term effects on one’s career, depressing earnings by as much as 20 percent after fifteen to twenty years. Given the severity of a job loss for earnings, an important question is how much such an event affects one’s standard of living during a spell of unemployment. This blog post explores how unemployment and expectations of job loss interact to affect household spending.
Discussion Paper
An Update on How Households Are Using Stimulus Checks
In October, we reported evidence on how households used their first economic impact payments, which they started to receive in mid-April 2020 as part of the CARES Act, and how they expected to use a second stimulus payment. In this post, we exploit new survey data to examine how households used the second round of stimulus checks, issued starting at the end of December 2020 as part of the Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act, and we investigate how they plan to use the third round authorized in March under the American Rescue Plan Act. We find remarkable ...
Discussion Paper
Consumers Expect Modest Increase in Spending Growth and Continued Government Support
The New York Fed’s Center for Microeconomic Data released results today from its August 2020 SCE Household Spending Survey and SCE Public Policy Survey. The former provides information on consumers' experiences and expectations regarding household spending, while the latter provides information on consumers' expectations regarding future changes for a wide range of fiscal and social policies and the potential impact of these changes on their households. These data have been collected every four months since December 2014 for the SCE Household Spending Survey and October 2015 for the SCE ...
Discussion Paper
The EGIs: Analyzing the Economy Through an Equitable Growth Lens
Inflation remains elevated, labor markets are close to the strongest they have been, real consumption is up year-over year, but all of these observations are with respect to averages. Behind these macroeconomic trends can be widely varying experiences across different demographic and socioeconomic groups that make up our society. To provide researchers, practitioners, and the public with timely, regularly updated and comprehensive answers to these questions, we launched the Equitable Growth Indicators (EGIs)—a new tool to help foster the evolving discussion about economic inequality and ...
Briefing
Does Infrastructure Spending Boost the Economy?
Public infrastructure investment is not like other government stimulus. Public investment acts as a typical demand stimulus but also provides important services to the private sector to assist with production of goods. This article analyzes the effects of public investment — especially highway construction, which is traditionally one of the largest components of public investment — on output. Dynamic effects turn out to be very important: Most studies find substantial benefits for the economy not in the immediate aftermath of the investment spending but a few years ahead.
Discussion Paper
Is the United States Relying on Foreign Investors to Fund Its Larger Budget Deficit?
The federal tax cut and the increase in federal spending at the beginning of 2018 substantially increased the government deficit, requiring a jump in the amount of Treasury securities needed to fund the gap. One question is whether the government will have to rely on foreign investors to buy these securities. Data for the first half of 2018 are available and, so far, the country has not had to increase the pace of borrowing from abroad. The current account balance, which measures how much the United States borrows from the rest of the world, has been essentially unchanged. Instead, the tax ...
Speech
A Different Kind of Recession
Remarks at the Institute of International Finance: Central Banking in the Age of COVID-19 Summit (delivered via videoconference).
Discussion Paper
Is the United States Relying on Foreign Investors to Finance Its Bigger Budget Deficit?
The fiscal packages passed in 2020 and 2021 to help the economy cope with the pandemic caused a dramatic increase in federal government borrowing. One might have expected that foreign investors were important buyers of this new debt, but that was not the case. They were instead net sellers of Treasury securities. Still, the amount of money flowing into the United States increased last year, which helped fund the government’s borrowing, if only indirectly. The upturn in inflows, though, was quite modest as a surge in domestic personal saving largely covered the government’s heightened ...