Trading Economics: A Guide to Economic Statistics for Practitioners and Students

6 Fiscal Indicators

The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.

Thomas Jefferson¹

Fiscal policy is closely linked to monetary policy in the sense that both have been used by governments around the world in order to try to control the economy. In other words, governments have used policy levers that they think will allow them to achieve policy goals of stable prices and full employment, in order ultimately to maximise economic growth. In the UK, for example, under the Thatcher government of 1979–1986, which was supposed to be a particularly monetarist government, monitoring of the public sector net borrowing (PSBR) became as important, if not more so at one point, than the monetary indicators, which were being missed regularly due to the deregulation of the financial sector. Indeed, Sir Keith Joseph, the government's monetarist guru at the time, said that fiscal policy was as necessary to stabilise the economy as was monetary policy.

So what is the definition of fiscal policy? According to Samuelson: ‘Fiscal policy is concerned with all those arrangements which are adopted by government to collect the revenue and make the expenditures so that economic stability could be attained/maintained without inflation and deflation.’² In the Oxford English Dictionary it is defined as an adjective ‘relating to government revenue, especially taxes’. It is also, of course, about government spending, and ...