In business-cycle models the effects of monetary policy depend on the fiscal reaction to interest rate changes. This paper presents new evidence on the effects of U.S. monetary policy on fiscal policy instruments and subsequently estimates a Heterogeneous Agent New Keynesian model with flexible fiscal feedback rules. I find that fiscal policy responds to monetary-induced output contractions with debt-financed, countercyclical tax and transfer policies, amid a gradual decline in spending to accommodate the debt increase. The model implies that monetary policy unopposed by a business-cycle stabilization motive of fiscal policy would be roughly 50% more contractionary.