In the Weekly Market Review, I talked about how the relationship between federal deficits and economic growth are different than what many people believe (take a look at the data below). While there is a chicken and egg relationship between deficits and growth, lower deficits do usually go hand-in-hand with higher GDP growth and more growth in employment (and vice versa).
Another way to say it is that while fiscal policy does have some influence on the economy, it is over-rated. The size of the economy and its momentum, easily trump fiscal policy.
Content provided by guest contributor, Rusty Vanneman, CLS Chief Investment Officer