This paper explores the interaction between ﬁscal policy and unemployment. It develops a dynamic economic model in which unemployment can arise but can be mitigated by tax cuts and public spending increases. Such policies are ﬁscally costly, but can be ﬁnanced by issuing government debt. In the context of this model, the paper analyzes the simultaneous determination of ﬁscal policy and unemployment in long run equilibrium. Outcomes with both a benevolent government and political decision-making are studied. With political decision-making, the model yields a simple positive theory of ﬁscal policy and unemployment.