ABSTRACT
Since 2008, the fiscal policy debate has gone through three phases. The first phase was dominated by a call for fiscal stimulus to avoid another Great Depression. The second phase, from 2010 onward, saw the focus shift to fiscal consolidation as high public debt started to loom large. This policy shift occurred despite a global economy that has not yet on a firm recovery path. The third phase may have begun, with weak growth fiscal austerity threatens to create a fiscal trap in which fiscal austerity lowers growth, thereby lowering tax revenues and necessitating more austerity. The purpose of this paper is to explain theoric causes of these three phases and to clarify the fiscal trap
