Tape 177 - Will the federal deficit crowd out private financing
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Narrator | Welcome once again, | 0:03 |
as MIT Professor Paul Samuelson | 0:04 | |
discusses the current economic scene. | 0:06 | |
This series is produced by | 0:08 | |
Instructional Dynamics Incorporated. | 0:09 | |
Professor Samuelson, one of the main questions | 0:12 | |
being discussed now is the size of the deficit. | 0:14 | |
Is it running too large? | 0:17 | |
Paul | In order to answer the question | 0:22 |
of whether the deficit that is in prospect | 0:24 | |
is so large that it will crowd out private, | 0:27 | |
needed investment, I think we should take a look | 0:32 | |
at the whole background of where we are now. | 0:36 | |
Since making my last recording, | 0:40 | |
we have learned the grim facts | 0:44 | |
about the unemployment report for March, | 0:46 | |
and although the February rate | 0:52 | |
had held steady at 8.2% in February, | 0:56 | |
just where it had been in January, | 0:59 | |
our luck | 1:02 | |
ran out in March, | 1:04 | |
and we saw a very sizeable increase to 8.7%. | 1:06 | |
Moreover, the actual unemployment situation | 1:12 | |
is probably a bit worse than is suggested by those numbers, | 1:16 | |
in that, again, in March, I believe, | 1:23 | |
there was a shortfall of the labor supply, | 1:27 | |
so that the number of people who were discouraged | 1:33 | |
from looking for work | 1:38 | |
was considerable, | 1:41 | |
and they weren't counted among the unemployed | 1:42 | |
even thought it would be very hard to distinguish | 1:45 | |
between somebody who still was looking for work | 1:49 | |
and was counted as unemployed, | 1:55 | |
and somebody who had been so unlucky | 1:56 | |
or so un-diligent in getting a job, | 2:00 | |
that he had given up, | 2:03 | |
and therefore when the scientific sample came to his door | 2:06 | |
to sample him or her, | 2:13 | |
he or she answered that they had not been looking for work | 2:16 | |
and therefore were not counted among the unemployed. | 2:21 | |
I don't suppose that any of the experts | 2:25 | |
think that the March number | 2:28 | |
is the worst that we're going to see. | 2:31 | |
Depending upon what your confidence is | 2:34 | |
in the seasonal correction | 2:37 | |
for the unemployment data, | 2:39 | |
that is, for the employment data | 2:43 | |
and for the labor force data, | 2:45 | |
and for the unemployment data, | 2:46 | |
perhaps we'll expect one of the biggest increases | 2:49 | |
to take place when school is out, colleges are out, | 2:55 | |
and a considerable number of young people | 3:00 | |
come into the labor market looking for jobs | 3:05 | |
that aren't there. | 3:08 | |
This is a normal seasonal matter, | 3:10 | |
and if a seasonal correction were neutral | 3:12 | |
with respect to good times and bad times, | 3:15 | |
then there would be no basis for predicting | 3:19 | |
that anything special and interesting would happen | 3:22 | |
in the June numbers | 3:25 | |
and in the July numbers. | 3:28 | |
But for reasons which I don't think I ought to go into | 3:30 | |
right now, there are definite interactions | 3:34 | |
between the cyclical behavior of the economy | 3:38 | |
and the seasonal behavior of the economy, | 3:42 | |
with the result that seasonal corrections | 3:45 | |
are not able to take care of these interactions. | 3:49 | |
In fact, it's not clear that we would want them to, | 3:53 | |
because they are genuine parts of the ongoing story. | 3:55 | |
We still do not have the first estimates | 4:04 | |
of the first quarter's GMP, | 4:09 | |
but we've been getting some leaks out of Washington | 4:13 | |
and all the private estimators | 4:16 | |
have been making their own guesses, | 4:19 | |
and it is thought that in real terms, | 4:21 | |
there will be a decline in output, | 4:26 | |
perhaps at the neighborhood of a 10% annual rate. | 4:29 | |
So if you just go by quarterly data, | 4:37 | |
it will look as if, I guess, | 4:38 | |
the inflection point of steepest descent | 4:41 | |
takes place in the first quarter of the year. | 4:46 | |
In saying that, of course, I'm making an implicit forecast, | 4:48 | |
but I'm going along with the conventional wisdom | 4:51 | |
which says that whether or not we bottom out | 4:53 | |
in the second quarter itself, | 4:58 | |
we will not be declining at so rapid a rate | 5:02 | |
in the second quarter as in the first quarter. | 5:06 | |
Well, it's against that background | 5:10 | |
that you will want to appraise the increase in the deficit. | 5:11 | |
Let me say that there is a crude theory | 5:19 | |
of imperialism which doesn't get much credence these days, | 5:23 | |
but which used to be taken quite seriously, | 5:27 | |
I don't know whether it deserved to be taken seriously. | 5:31 | |
In the past, you would have to | 5:35 | |
look into different time periods, | 5:39 | |
but I'm referring to the fact, the theory, | 5:41 | |
that what America needs for its prosperity | 5:44 | |
is wartime expenditures, or failing that, | 5:46 | |
cold war expenditures, | 5:51 | |
or failing that, | 5:52 | |
imperialistic expenditures, | 5:54 | |
because, so it is said, a capitalistic system | 5:56 | |
must always have somewhere a hole in its purchasing power | 6:00 | |
and must run out of steam | 6:03 | |
unless you can, from outside, | 6:05 | |
get an infusion of new blood. | 6:09 | |
As I've stated it that crudely, | 6:13 | |
I don't think it probably ever deserved much credence. | 6:15 | |
Maybe the reverse of the truth was as true | 6:20 | |
as that truth. | 6:22 | |
But in any case, | 6:25 | |
we have right now a very interesting experiment going on. | 6:28 | |
We have the eclipse of the American position in Indochina. | 6:32 | |
It's something which most of us have thought | 6:39 | |
was on its way for a long, long time, | 6:42 | |
we have, in our own minds, most of us | 6:45 | |
cut our losses, | 6:49 | |
and this is reflected in the very adverse reactions | 6:51 | |
which are being received | 6:57 | |
by President Ford's various requests | 7:00 | |
for last minute military aid | 7:03 | |
to Cambodia and to Vietnam. | 7:06 | |
Even Cambodia, which at the moment that I'm speaking, | 7:13 | |
hasn't technically fallen, although it seems | 7:16 | |
that the fall of the capital is overdue, | 7:19 | |
has not been cut off the allowance list of the president. | 7:22 | |
And in his speech sometime back to congress, | 7:28 | |
the president reiterated his desire for no less than, | 7:33 | |
well, really, essentially a billion dollars, | 7:39 | |
of which about 3/4 was for military aid, | 7:42 | |
and 1/4 for humanitarian relief. | 7:47 | |
Since America is in a recession, a recession which many call | 7:51 | |
the worst recession of the post-World War II period, | 7:55 | |
you would think if you just followed the simple theory | 7:58 | |
that a capitalist economy, | 8:04 | |
a mixed economy, needs imperialism, | 8:08 | |
that this would be just what the doctor ordered | 8:10 | |
as an excuse and a pretext to create purchasing power | 8:13 | |
and that congress, the executive committee of capitalism, | 8:16 | |
would be voting great sums of money | 8:20 | |
for this purpose, | 8:23 | |
precisely because this is a useless purpose, | 8:26 | |
it's money thrown down a rat hole, so the theory would go, | 8:28 | |
it's best because if congress appropriates useful money, | 8:33 | |
let's say to build TVA dams, then those dams would get built | 8:37 | |
then you'll run out of need | 8:43 | |
and opportunities for further money. | 8:45 | |
But if you pour your money down a rat hole, | 8:47 | |
a rat hole as indefinite size | 8:49 | |
and you'll never run out of excuses | 8:52 | |
for deficit spending. | 8:55 | |
Well, that would be a very poor hypothesis | 8:58 | |
by which to understand events as they're happening, | 9:02 | |
and would be an extremely poor model and framework | 9:06 | |
in terms of making predictions. | 9:11 | |
And after all, part of what constitutes a science | 9:13 | |
is the ability to give conditional probabilities | 9:19 | |
about what is going to happen that are more accurate | 9:23 | |
than the conditional probabilities | 9:28 | |
that would have to be stated by somebody | 9:31 | |
who had not mastered this science and knowledge | 9:35 | |
that resides in a political economy. | 9:40 | |
Well, whether we're gonna have too large a deficit | 9:43 | |
or too small a deficit does not hinge at all | 9:46 | |
upon what's happening in Indochina, | 9:51 | |
unless there is some administration finagling with funds. | 9:57 | |
The edict is very clear, both from the American people | 10:05 | |
and from their representatives in both houses of congress, | 10:08 | |
namely, that the American people are not going to use this | 10:13 | |
as the method of pump-priming | 10:16 | |
to get us out of the recession. | 10:19 | |
Well, let me turn to | 10:23 | |
where the deficit is going to arise. | 10:25 | |
The deficit is going to arise, | 10:29 | |
in part, but in small part, | 10:31 | |
at the state and local levels. | 10:34 | |
At the state and local levels, | 10:36 | |
tax revenues have been disappointing | 10:38 | |
until you look at what's been happening to the GMP | 10:42 | |
and then you realize that the tax revenues | 10:45 | |
are just on target. | 10:48 | |
They have not been growing in the way they would grow | 10:50 | |
in a normally dynamic year, | 10:53 | |
which was not a repression-- | 10:58 | |
a recession year. | 11:00 | |
Since the state governments find that the drains on them | 11:04 | |
are the causes which have turned to them | 11:13 | |
and which are deemed, within the present political process | 11:16 | |
as legitimate, are burgeoning needs, | 11:20 | |
the needs associated with the recession itself; | 11:25 | |
an increase in the need for welfare assistance, | 11:28 | |
the need to finance various forms of distress. | 11:31 | |
There is some involuntary deficit financing | 11:42 | |
which is going on at the state level. | 11:46 | |
As an example, my own state of Massachusetts | 11:48 | |
has a reform governor; he came into power | 11:51 | |
on a campaign, this is a Democrat, mind you, | 11:54 | |
that he would not raise taxes, | 11:59 | |
as against the lax spending Republican, Frank Sargent, | 12:02 | |
who proceeded him, | 12:06 | |
and Governor Dukakis is finding it quite impossible | 12:09 | |
to reduce expenditure so he won't have to increase taxes. | 12:14 | |
So, what he's now proposing | 12:19 | |
is that we undertake at the state level, | 12:21 | |
some short-term borrowing. | 12:25 | |
He says that short-term borrowing at the state level | 12:27 | |
is all right, because it's going to be funded later, | 12:30 | |
which I suppose is the tip-off to us all | 12:34 | |
that he in fact is going to have to increase taxes. | 12:37 | |
That story, which I've just told, | 12:43 | |
of an involuntary deficit, but in some part, | 12:44 | |
an induced increase in tax rates | 12:48 | |
because of a failure, due to the recession, | 12:51 | |
of the old tax rate structure of creating the needed | 12:56 | |
increment of revenues, I suppose can be told | 12:59 | |
over and over again in most of the 50 states. | 13:03 | |
And it's typical of what happens | 13:06 | |
at the state and local level. | 13:08 | |
Now, I would not say that increasing state expenditures | 13:10 | |
and increasing state taxes has no net stimulating effect | 13:15 | |
upon the economy. | 13:19 | |
We do have something in modern national income analysis | 13:21 | |
called a balanced budget multiplier theorem, | 13:26 | |
which says that even if a program | 13:29 | |
of extra government spending is not financed by borrowing, | 13:34 | |
and even if it's not financed by borrowing | 13:41 | |
which involves money creation, there may still be | 13:45 | |
a positive net stimulus. | 13:48 | |
But that is much less, dollar per dollar, | 13:51 | |
by anybody's theory, | 13:56 | |
than the stimulus that comes from outright | 13:58 | |
deficit financing financed by the Federal Reserve system | 14:02 | |
through its friendly willingness | 14:08 | |
to increase the stock of money. | 14:10 | |
So, at the state and local level, | 14:14 | |
we are not going to get great offsets to the recession. | 14:17 | |
Indeed, if the whole fiscal system | 14:23 | |
behaved like the state and local system, | 14:26 | |
then we would have no built-in stabilizers of any magnitude, | 14:28 | |
and as the private economy got depressed, | 14:32 | |
and as the dominoes fell, the state and local governments | 14:35 | |
would at best accommodate themselves to the decline | 14:41 | |
and would show no real substantial resistance | 14:46 | |
to the decline. | 14:50 | |
That is why, at the federal level, | 14:51 | |
since it is the federal government | 14:53 | |
which has the greatest ability to borrow, | 14:55 | |
which is the spender of last resort, | 15:00 | |
just as its tool, the central bank, | 15:04 | |
is the lender of last resort, | 15:07 | |
and is the creator of money of first and last resort. | 15:09 | |
In consequence, in order to keep the unemployment level | 15:15 | |
of 8.7%, which most of us guess is gonna go to 9% | 15:20 | |
and go somewhat above 9% | 15:27 | |
before we're finished with this movement, | 15:29 | |
in order to keep it from going to 10 and 11%, | 15:32 | |
the physicians prescribe that the federal government | 15:36 | |
reduce its taxes, and we've had the 22 billion dollar | 15:44 | |
tax reduction bill signed by the president, | 15:48 | |
admittedly more than the 16 billion he'd asked for, | 15:52 | |
but less than the senate version of more than 30 billion. | 15:55 | |
And we're getting an increase in expenditures | 16:00 | |
occasioned by the social needs of the country, | 16:05 | |
but also those social needs are being listened to | 16:09 | |
more attentively because more money | 16:12 | |
is what the fiscal physicians seem to prescribe | 16:17 | |
in this period of recession. | 16:21 | |
Of course, if the president could spend | 16:23 | |
that extra billion dollars, | 16:27 | |
and I suppose on humanitarian relief | 16:29 | |
and just getting Americans out of Indochina, | 16:31 | |
maybe a quarter of the billion dollars will get spent. | 16:34 | |
That's one of the things that will unbalance the budget, | 16:39 | |
but which, at the same time, will be keeping up the flow | 16:42 | |
of disposable income, that is, of the income | 16:45 | |
which the American people have to spend | 16:49 | |
after they pay their taxes, | 16:50 | |
and after you've corrected | 16:52 | |
for the behavior of the price level. | 16:54 | |
The personal income of the American people | 16:57 | |
and the disposable income | 17:00 | |
has been, both of those, which are very closely connected, | 17:01 | |
have been holding up very well, | 17:05 | |
precisely because | 17:06 | |
we have not been running a balanced budget. | 17:07 | |
Now, the question is, | 17:11 | |
what about dosage? | 17:14 | |
Are we having too large a deficit | 17:16 | |
in too short a period of time | 17:19 | |
with a crowding-out effect? | 17:22 | |
That is being discussed among Wall Street people themselves, | 17:24 | |
and it showed itself for a while at least, | 17:29 | |
in a rise in short-term interest rates | 17:32 | |
and the fall in the prices of long-term bonds | 17:35 | |
as everybody began to fear | 17:40 | |
that later interest rates will rise, | 17:43 | |
it'll bring down the price of bonds, | 17:45 | |
well, in anticipatory markets, which is kind of a market | 17:46 | |
that one has in Wall Street, | 17:51 | |
if you think a thing's gonna happen, | 17:55 | |
you tend to make it happen right away. | 17:57 | |
I think I've mentioned before | 18:01 | |
that Professor Franco Modigliani, my colleague here at MIT, | 18:02 | |
and Professor Albert Ando, | 18:09 | |
his co-worker at the University of Pennsylvania, | 18:11 | |
organized a letter to the New York Times | 18:14 | |
to be signed by a number | 18:19 | |
of so-called distinguished economists, | 18:21 | |
which urged that congress pass tax reduction | 18:27 | |
and possibly some expenditure increase | 18:34 | |
and that President Ford sign such a bill. | 18:36 | |
So far, the wishes of those letter-writers, | 18:40 | |
and I'm included among them, | 18:43 | |
have been realized | 18:45 | |
and no sooner had we written our letter | 18:48 | |
in the New York Times, | 18:51 | |
signed by us, with, I guess, our affiliations indicated, | 18:52 | |
than the Wall Street Journal, as I think I've mentioned, | 18:57 | |
ran an editorial in which it said that | 19:01 | |
there would only be, | 19:05 | |
there would be increase in federal spending | 19:07 | |
but this would be at the expense of private spending | 19:09 | |
because this deficit would crowd out the housing expenditure | 19:12 | |
and the plant equipment expenditure | 19:18 | |
and the inventory investment expenditure, | 19:19 | |
which would otherwise have taken place. | 19:23 | |
Well, there's been a good deal of discussion of this, | 19:30 | |
and I want to marshal the evidence | 19:35 | |
and give you a quantitative appraisal | 19:40 | |
of where the truth probably lies. | 19:43 | |
As I said, and as I've written, there was one sentence | 19:50 | |
in that letter which I did not care for, | 19:56 | |
and which I thought I had removed. | 20:00 | |
It doesn't make me hugely unhappy | 20:03 | |
for such a sentence to appear under my signature, | 20:05 | |
but I think it's a sentence which can be misunderstood, | 20:08 | |
so let me state it. | 20:12 | |
What the letter that appeared in the New York Times said | 20:14 | |
in that sentence was, | 20:18 | |
that people don't realize that the increase in income, | 20:20 | |
much of it real income because the rate of inflation | 20:27 | |
is about what it had otherwise have been | 20:31 | |
in the period we're talking about, | 20:34 | |
and the rate of inflation was actually improving | 20:37 | |
as I had joy to mention on these tapes, | 20:40 | |
the increase in real income, | 20:46 | |
the increase in real employment, | 20:49 | |
will be parceled out in part in an increase in consumption, | 20:51 | |
but a part of it will be parceled out | 20:57 | |
as an increase in taxes, which will of course | 20:59 | |
reduce the size of the deficit, | 21:03 | |
and part of it will go | 21:04 | |
in the form of an increase in savings. | 21:06 | |
So you can't assume | 21:09 | |
that there is just a certain unchanged volume of savings. | 21:12 | |
The volume of savings itself will increase. | 21:18 | |
Moreover, we have reason to know from past experience | 21:21 | |
that when you crowd a great deal of extra temporary income | 21:27 | |
into a short period, a great deal of that is saved. | 21:31 | |
Hence, it can be argued, and was argued by Sam Nakayama | 21:37 | |
of the, Kidder Peabody, who was not primarily a Keynesian, | 21:42 | |
I think he would probably regard himself | 21:49 | |
as more of a monetarist than a Keynesian. | 21:51 | |
He's argued that the Wall Street Journal had the two sides | 21:54 | |
of its flow of funds balance sheet | 21:57 | |
quantitatively incorrectly, | 22:00 | |
and it stacked the cards | 22:03 | |
in favor of the crowding-out thesis. | 22:05 | |
The point that I wish to make | 22:11 | |
is that there is no automatic balance, | 22:13 | |
so that the greater the deficit, the better, | 22:16 | |
and you don't have to worry on this account. | 22:20 | |
What's true is that some part will go into consumption, | 22:22 | |
some part will go into savings, | 22:28 | |
some part of the spending will meet bottlenecks | 22:29 | |
and will raise prices, and that will have effects | 22:33 | |
upon interest rates. | 22:35 | |
And generally speaking, there always is an interest rate | 22:36 | |
which, or a structure of interest rates, | 22:40 | |
which will bring into equivalence | 22:43 | |
the two sides of the flow of funds balance sheet. | 22:45 | |
And the proper way of asking the question | 22:49 | |
is whether at unchanged interest rates, | 22:52 | |
with unchanged Federal Reserve policy, | 22:58 | |
will this new incremental deficit get itself financed, | 23:01 | |
thereby not displacing anybody else from the labor market? | 23:05 | |
And I think that the answer to that is no. | 23:11 | |
And any sentence that speaks of a tautology, | 23:14 | |
and which does not, in the next breath, | 23:18 | |
warn against the misinterpretation of the tautology, | 23:20 | |
is, I believe, to be regretted. | 23:24 | |
There would be a tendency, | 23:28 | |
if any kind of private investment improves, | 23:31 | |
for the rate of interest to go a bit higher | 23:34 | |
than it would otherwise have gone. | 23:36 | |
Note the careful way I state the matter, | 23:39 | |
because if the recession continued | 23:41 | |
without the deficit spending, | 23:43 | |
the interest rates might have fallen down, | 23:46 | |
and so the deficit spending that comes in now | 23:48 | |
may just keep the interest rates from falling down, | 23:51 | |
may just hold them level, | 23:53 | |
so I'm not arguing that the effect of the deficit | 23:56 | |
must be to raise interest rates absolutely, | 23:59 | |
but only to raise interest rates | 24:03 | |
over what they otherwise would have been. | 24:05 | |
It's a very safe statement to make | 24:07 | |
because it's not easy to know, in fact, | 24:08 | |
you never can know accurately what would otherwise | 24:11 | |
have been the case of history | 24:14 | |
if history were to have taken place in a different way | 24:16 | |
from what it actually does, and from what it actually will. | 24:20 | |
But the question that one has to ask is, | 24:26 | |
how strong is the force of the recession, | 24:30 | |
and how strong, with the deficit, | 24:33 | |
are the forces making for an end of the recession? | 24:36 | |
And how high will have to be the induced changes | 24:40 | |
in interest rates? | 24:46 | |
And here, I think that you must guard against the fact | 24:47 | |
that the discussion of whether the def | 24:51 | |
will be crowding out activities and raising interest rates, | 24:54 | |
that discussion itself is self-inflammatory | 24:59 | |
in the short-run. | 25:01 | |
And, if Caesar's wife is absolutely pure as the driven snow, | 25:03 | |
and yet people begin to wonder | 25:09 | |
whether she may be besmirched, | 25:11 | |
then her reputation is besmirched. | 25:15 | |
So it is with respect to bonds. | 25:18 | |
Now, I don't believe that these self-fulfilling movements | 25:20 | |
of speculation and expectations | 25:26 | |
are able to go their own scenario indefinitely. | 25:29 | |
I think in the longer run, | 25:34 | |
the expectations are not exogenous given variables | 25:37 | |
which cannot be affected, | 25:42 | |
and which can take their ration away, | 25:43 | |
but they are endogenous variables, | 25:45 | |
and the smartest people, | 25:47 | |
the ones who make the most money in the market, | 25:48 | |
will realize, in the longer run, | 25:50 | |
what should be the proper expectations. | 25:53 | |
And so, I guess that I would say | 25:55 | |
that the deficit that we're talking about | 25:59 | |
is of the size which is actually needed | 26:02 | |
to have the Federal Reserve do easily | 26:06 | |
with interest rates that do not fall cataclysmically. | 26:13 | |
What needs to be done, and I would expect | 26:20 | |
that interest rates will rise as we go later into the year | 26:24 | |
if the deficit fulfills its purpose, | 26:29 | |
which is to bring the recession to an end | 26:32 | |
and to bring us to an upturn. | 26:35 | |
And if that upturn is anywhere near as healthy, | 26:38 | |
in real terms, as perhaps it ought to be, | 26:40 | |
and as most of the consensus forecasters are forecasting, | 26:44 | |
then I would expect that the Federal Reserve | 26:50 | |
will find itself letting interest rates go up. | 26:55 | |
It'll certainly do that | 26:58 | |
if it is not willing to have rates of growth | 27:00 | |
of the money supply proceed in the period, let us say, | 27:03 | |
from Labor Day to New Year's, or more specifically, | 27:08 | |
from around Thanksgiving, | 27:13 | |
unless it's willing to see | 27:18 | |
the rate of growth of the money supply register numbers | 27:21 | |
like 7, 8, 9% for a while, | 27:24 | |
to make up for the sub-4 and 5% rates | 27:29 | |
which were observed late last year. | 27:35 | |
Then it will have to let interest rates rise. | 27:40 | |
My guess is, the Federal Reserve will act in pretty much | 27:44 | |
the same way, by the same logic, as it was acting last year, | 27:48 | |
but the effects will be on the opposite side | 27:53 | |
as we move into the upturn. | 27:55 | |
Namely, the Federal Reserve will be concerned | 27:58 | |
not to let interest rates rise too fast. | 28:00 | |
In order to keep interest rates from bobbing up too fast, | 28:04 | |
they will find themselves letting the money supply grow | 28:07 | |
a bit faster than once a month | 28:10 | |
at the Open Market Committee meetings | 28:14 | |
they instructed the operator of the desk, Alan Holmes, | 28:16 | |
in New York, to let happen. | 28:21 | |
It just shows you can't serve two gods at the same time. | 28:24 | |
You can serve one or the other, | 28:29 | |
or as I would prefer to put it, | 28:31 | |
you can have a multipurpose goal | 28:33 | |
and I think that this would be a good thing, | 28:39 | |
because I do believe that, given the amount of slack | 28:43 | |
which we're gonna have in the system | 28:47 | |
for the next two or three years | 28:49 | |
from what has already taken place, | 28:50 | |
it will be a desirable thing to have a recovery | 28:52 | |
which is not an anemic one, even though, I have to say, | 28:55 | |
that the longer the recovery, | 29:01 | |
and the more vigorous the recovery, | 29:06 | |
the greater will begin to be, the new pressures, | 29:09 | |
newly reactivated pressures, | 29:14 | |
for a resumption of the inflation rate. | 29:17 | |
Or perhaps to state it in a more complicated | 29:25 | |
but a more accurate way, | 29:29 | |
there is danger that as we move into the next election year, | 29:31 | |
that you will begin, again begin to see, | 29:37 | |
a re-acceleration of inflation. | 29:41 | |
Could that re-acceleration of inflation bring us back | 29:44 | |
to two-digit price inflation? | 29:47 | |
The answer to that is yes, of course it could! | 29:50 | |
Whether that's the most probable outcome | 29:54 | |
I think will depend upon many factors, | 29:56 | |
such as how the price of oil holds up, | 29:58 | |
and also, on what happens to the weather. | 30:00 | |
Here we are in macro-economics, | 30:04 | |
once again concerned about the late spring, | 30:06 | |
the danger of floods with late plantings, | 30:11 | |
it's almost as if we're going through an anxiety period | 30:14 | |
much like that of last year. | 30:19 | |
And yet, that's the stuff out of which analysis | 30:21 | |
of the passing economic scene has to be made. | 30:25 | |
Narrator | If you have any comments or questions | 30:30 |
for Professor Samuelson, | 30:31 | |
address them to Instructional Dynamics Incorporated, | 30:33 | |
450 East Ohio Street, Chicago, Illinois, 60611. | 30:36 |
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