Federal fiscal policy during the recession was abnormally expansionary by historical standards. However, over the past 2½ years it has become unusually contractionary as a result of several deficit reduction measures passed by Congress. During the next three years, we estimate that federal budgetary policy could restrain economic growth by as much as 1 percentage point annually beyond the normal fiscal drag that occurs during recoveries.Federal Reserve Bank Of San Francisco Economic Letter
Fiscal Headwinds: Is the Other Shoe About to Drop?
Brian Lucking and Daniel Wilson
(h/t Mark Thoma at Economist's View)
In the debate, Warren was talking about fiscal drag due to a deficit being too small.
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