Hill May Have More Room to Prime the Pump -- in Short Run
Two recent estimates indicate that government tax and spending policies are pumping up the economy much less than this yearÛªs federal budget deficit would suggest, and one of them indicates that from now until next summer government stimulus of the economy will be declining.</br></br>These estimates suggest that in the short run. Congress may have more room and cause for pump-priming to drive down the unemployment rate than many lawmakers have assumed.</br></br>For the longer run. however, even those arguing for short-term stimulus say that the large federal budget deficits now likely are a problem, and agree that steps must be taken to bring them down.</br></br>The estimates of how much the government is stimulating the economy center on what economists call the ÛÏhigh employment" deficit.</br></br>This drops from the actual dollar deficit those amounts that are due to weakness in the economy as tax revenues fall off or un- employment compensation rises with recession. What is left is.a measure of policy: what the deficit would be under given tax and spending policies at a constant rate of high employment.