The Nature of Fiscal Policy

Abstract

Fiscal policy is commonly looked upon as comprising those variations in government tax and expenditure programmes which are undertaken with the express purpose of securing the goals of macro-economic policy. It is therefore but one aspect of the system of public finance and does not include measures which are undertaken for reasons of allocative efficiency or which reflect a concern with the distribution of income. Since changes in tax and expenditure policies often imply a change in the size of the national debt, variations in debt policy are often included under the general heading of fiscal policy. Whilst we refer briefly to the choice between taxation and debt in the financing of any given expenditure programme, we consider debt management policy — by which we mean changes in the composition of a given debt — to be an entirely separate and distinct policy question and one beyond the scope of our current concern. The debt referred to above should be understood in its commonly accepted sense as consisting of bonds and securities issued by the government.