Final answer:
In the short run, increased government spending can stimulate economic activity and growth, but it may lead to deficit spending and potentially a higher national debt. Government shutdowns can occur if Congress and the president do not agree on a budget, and statutory controls like PAYGO aim to prevent unchecked deficit spending.
Step-by-step explanation:
If Congress decides to spend a lot of extra money over the next two years, the immediate effect in the short run could be increased economic activity due to higher government spending. This can lead to more jobs and economic growth. However, if this extra spending is not offset by increased revenues, it can lead to deficit spending, which might necessitate an increase in the national debt if the debt ceiling is raised to accommodate this spending. This deficit spending could stimulate the economy in the short run but might have negative long-term consequences.
Past scenarios wherein Congress and the president were unable to agree on a budget have led to government shutdowns, as seen in 2013 and the winter of 1995-1996. Furthermore, deficit spending is constrained by mechanisms like the PAYGO Act, which requires that any increase in the deficit due to legislation be balanced by equivalent reductions, to avoid triggering sequestration.
Conversely, disputes about raising the debt ceiling have previously brought the U.S. close to defaulting on its debt, creating financial uncertainty. Politicians often favor expansionary fiscal policy such as spending increases during recessions, but are less inclined to enforce contractionary measures when the economy is booming.