Deficits: Their Impact on Inflation and Growth : a Staff Study

Front Cover
U.S. Government Printing Office, 1981 - Deficit financing - 49 pages
 

What people are saying - Write a review

We haven't found any reviews in the usual places.

Other editions - View all

Common terms and phrases

Popular passages

Page 15 - High interest rates and tight money can restrain the economy — and will do so if fiscal policy fails to do it. But the cost of monetary restraint is high and unfair, imposed on a single industry — homebuilding.
Page 46 - Government Statistics as a Guide to Economic Policy : Food Stamps and the Spurious Increase in Unemployment Rates.
Page 14 - Over the whole period, about 15-20% of the federal deficit appears to have been monetized. This effect, however, nearly disappears when one controls for the substantial shift in monetary policy in the last decade. In any given year, the federal deficit does not appear to have any significant effect on the rate of change of the money supply.
Page 11 - ... in spending — by consumers, businesses, or foreigners — its impact on inflation depends on at least two factors: First, if the increased spending is to aggravate inflation the Federal Reserve must accommodate it— at least to some extent — by permitting faster money growth. If there is no accommodation, then the financing of the deficit will drive up the cost of borrowing and choke off some private-sector spending — eventually relieving the upward pressure on prices caused by the deficit....
Page 11 - ... one cause of inflation, but the relationship is more complex than the simple myth suggests. A government deficit increases total spending in the economy. Like any other rise in spending — by consumers, businesses, or foreigners — its impact on inflation depends on at least two factors : First, if the increased spending is to aggravate inflation, the Federal Reserve must accommodate it — at least to some extent — by permitting faster money growth. If there is no accommodation, then the...
Page 26 - ... soil and water conservation, school lunches, day-care centers, and public health services. However, other spending programs, such as unemployment compensation and Trade Adjustment Assistance act to decrease the supply of labor and other inputs, and thereby to increase production costs. On the whole, changes in the deficit that result from tax changes appear to be a more powerful stimulus to production. When personal and business taxes fall, the rewards and, by hypothesis that any income effects...
Page 26 - ... in the current period. My fourth cost hypothesis recognizes that increases in the federal government's fiscal deficit can change incentives to work, save, invest, and take risks. In principle, it doesn't matter whether suppliers are motivated to change their work habits and productive activities by changes in the federal government's spending levels and programs or by changes in effective tax rates. Some spending programs operate directly to lower the production costs of the private sector. Examples...
Page 14 - The general tendency in US economic policy over the last two decades has been for budget deficits to stimulate money growth and thus promote inflation.
Page 14 - Company [1981, p. 141] found that "deficits have had a significant impact on the growth of the US money supply throughout most of the period since 1961.

Bibliographic information