This usually happens when there is a fear of being laid off or of impending bad economic times. People react to this type of forecast by shutting down their spending, when that s exactly what the economy might need to prevent to predicted doom. In this case, the government would use expansionary fiscal policy , lowering the tax rates so that consumers had more disposable income to go spend at the stores. The government would also increase its spending allowing for more federal jobs and increased monies to social and defense programs. Of course, there are multiple limitations to fiscal policy.
Political constraints is probably the most obvious.
That is not the way to re-election. Therefore, many politicians wind up voting against the economy and for their political health, even if they know better. Another limitation is the ability to forecast a business cycle. Although it hasn t happened recently, expansions and contractions can sometimes show up rather suddenly. It can be difficult to predict during fiscal budget disputes what the next year will bring economically speaking.