The Advantages and Disadvantages of Using the Different Tools of Fiscal Policy

Advantages:

Indirect taxes can be adjusted almost immediately after they are announced and can influence spending behaviour instantly and generate revenue for the government.

Social policies can be adjusted almost instantly by raising such taxes.

Disadvantages:

Direct taxes are more difficult to change without considerable notice, often many months. The same for welfare and other social transfers.

Capital spending plans take longer to formulate and implement, typically over a period of years. The slower the impact of a fiscal change, the more likely other exogenous changes will already be influencing the economy before the fiscal change kicks in.

The fiscal policy tools may also have expectational effects at least as powerful as the direct effects.