Title: Some Observations on Economic Policy in 1961 and 1962
Abstract: I must, alas, call attention to the peculiar ideological problem that is again paramount in deciding fiscal policy for the next i8 months. Shall the fiscal I963 programs be restricted to the constraint of a balanced budget? Ideology can never be met on its own terms by reason. It has to be matched by ideology.2 But unfortunately, as time passes, ideological ripostes remain to plague one. The notion that the fiscal I963 budget could be balanced was a powerful one in quieting the irrational opposition to needed fiscal expansion. If private spending had boomed, that notion would today do us no harm. But facts are facts. It was harmful to let a large budget surplus develop in the weak I959-60 revival and thereby help to choke off that recovery. Similarly, it would be tragic if a premature budget balance were to weaken the momentum of the present recovery long before we have come close to healthy employment and growth levels. That I believe is the basic policy question of I962.3 My own views on how to answer the question must be obvious from the above remarks. Fiscal and monteary policy should tighten only when substantial misbehavior on the price, wage, and international fronts has developed and cannot be well met by more specific remedies. They should not be tightened as a sop to outmoded ideology. 2 Of course, all this can lead to upside-down economics. Thus, I must bear some of the credit for the following gambit: if ideology prevents us from having the needed deficit in recession times, let us channel that ideology so as to negate the built-in dampening stabilizer in our system. This involves upside-down arguments of the type, Now that recovery is rising enough to give us more tax receipts, we can afford (sic) to increase our expenditures or cut tax rates. The economics illogic is apparent: yet in political economy, two wrongs may come nearer to a right than one alone. 8An experienced observer would have to admit that the odds favor the view that the fiscal year will end up with a larger deficit than is forecast in the original budget estimates a significant factor to keep in mind.
Publication Year: 1962
Publication Date: 1962-02-01
Language: en
Type: article
Indexed In: ['crossref']
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