The statement is true. The standardized employment budget (SEB) is a measure that estimates what the government’s budget surplus or deficit would have been if the economy were operating at full employment. This means it adjusts for the effects of the business cycle, including the impact of automatic stabilizers like unemployment benefits and progressive taxation.
Automatic stabilizers are mechanisms that automatically increase government spending or decrease taxes when the economy slows down, and vice versa. By removing these cyclical effects, the SEB provides a clearer picture of the underlying fiscal position of the government, independent of the current phase of the business cycle.
In summary, the standardized employment budget indeed tells us what the budget surplus or deficit would have been if the business cycle had not resulted in automatic stabilizers. This helps policymakers understand the structural balance of the budget, which is crucial for making informed fiscal decisions.