Fiscal policy is the use of the federal tax and spending process to influence the level of economic activity. In its simplest form, fiscal policy involves changing taxes and/or government spending in order to expand or contract aggregate DEMAND towards a targeted level of equilibrium national INCOME. Contractionary fiscal policy dictates a decrease in spending and/or an increase in taxes in order to reduce economic activity. Expansionary fiscal policy is the opposite, an increase in spending and/or a decrease in taxes in order to stimulate economic activity. In the United States, fiscal policy became an accepted, important part of macroeconomic policy during the GREAT DEPRESSION. In the absence of private CONSUMPTION spending and business INVESTMENT, government spending was used as an alternative source of demand. As advocated by the British economist John Maynard Keynes, President Franklin Roosevelt’s “New Deal” administration greatly expanded government spending through programs such as the CIVILIAN CONSERVATION CORPS and the WORKS PROGRESS ADMINISTRATION. Many of today’s state parks and older government buildings were created during the Depression. When estimating the impact of fiscal policy, economists consider how the policy is financed and the indirect impacts of the fiscal-policy measure. For example, if an increase in government spending is financed by an increase in taxes, the increase in government spending will be largely offset by a decrease in consumption spending. An increase in government spending financed through borrowing will have a larger immediate impact on the economy but will also likely increase INTEREST RATES due to the government’s increased demand for funds. This, in turn, will likely increase interest rates, reducing consumption spending and private investment. Economists call this the crowding-out effect. Many economists support the use of discretionary fiscal policy along with a consistent MONETARY POLICY to stabilize the overall economy. Other economists argue the time lag between the implementation of fiscal-policy measures and their impact causes these efforts to exacerbate rather than mitigate peaks and troughs in BUSINESS CYCLES. In addition to discretionary fiscal policy, the U.S. political economic system also includes AUTOMATIC STABILIZERS. During periods of economic expansion, progressive tax rates—tax rates that increase as income increases—automatically reduce consumers’ incomes, reducing their spending and slowing the rate of growth in aggregate demand. During periods of economic contraction, UNEMPLOYMENT and WELFARE benefits offset some of the loss of income and spending when workers lose their jobs. These are referred to by economists as automatic stabilizers. In the U.S. political system, the use of fiscal policy during periods of economic decline to stimulate the economy is widely accepted. The logical corollary is to advocate a decrease in government spending and/or an increase in taxes during periods of an inflationary, full-employment economy. Few politicians want to run for reelection after having increased taxes or to cut voters’ favorite government programs, which is why monetary policy is often needed to counterbalance excessively expansionary fiscal policy.