Croce, Mariano MNguyen, Thien TungSchmid, Lukas2023-05-222016-07-012012-07-012016-06-01https://repository.upenn.edu/handle/20.500.14332/34456Recent fiscal interventions have raised concerns about US public debt, future distortionary tax pressure, and long-run growth potential. We explore the long-run implications of public financing policies aimed at short-run stabilization when: (i) agents are sensitive to model uncertainty, as in Hansen and Sargent (2007), and (ii) growth is endogenous, as in Romer (1990). We find that countercyclical deficit policies promoting short-run stabilization reduce the price of model uncertainty at the cost of significantly increasing the amount of long-run risk. Ultimately these tax policies depress innovation and long-run growth and may produce welfare losses.© 2012. This manuscript version is made available under the CC-BY-NC-ND 4.0 license (http://creativecommons.org/licenses/by-nc-nd/4.0/)FinanceFinance and Financial ManagementArticle