What is the relationship between fiscal policy and economic instability?

Fiscal policy is supposed to be used to prevent economic
instability.  However, if used improperly it can well lead to
instability.

Fiscal policy is supposed to be used to
manipulate levels of aggregate demand to keep an economy growing that the proper rate. 
When an economy is not growing quickly enough, taxes are supposed to be lowered and
spending increased.  When an economy is overheating, the reverse is true.  In these
cases, fiscal policy would bring about economic
stability.

However, there are times when fiscal policy is
used unwisely.  Politicians typically are willing to continue to increase spending and
cut taxes even at times when there is no need to stimulate the economy.  This could lead
to excessive inflation.  In the US today, there is a threat of economic instability
because taxes have been cut and spending increased to the point that the country faces a
huge deficit and debt problem.  The fact that Congress cannot agree with the President
on how to fix the problem adds to the potential for economic
instability.

In general, then, fiscal policy can cause
economic instability when the wrong fiscal policy is used at the wrong
time.