The Puzzling Economy
ONE of the most puzzling aspects of the economy is why enormous Federal deficitsÛÓnearly $40 billion for this fiscal year and $25.5 billion for nextÛÓare having so little effect in bringing about economic recovery.</br></br>It is even more mysterious than the ease with which President Nixon shifted from being a budget-balancer to historyÛªs biggest deficit-spender. At least, one can find a political motivation for the PresidentÛªs dramatic conversion.</br></br>The failure of deficit spending to have the intended stimulative effect requires closer analysis. What is becoming clear is that pumping a lot of expansionary power into peopleÛªs hands by fiscal or monetary means can be disappointing if other considerations induce saving rather than spending.</br></br>Consumer buying is any- Û¢ thing but enthusiastic, and there are now serious doubts that the ÛÏconsensusÛ forecast for a $100 billion growth in Gross National Product this year can be achieved.</br></br>Economic recovery on the business side has also been weak, despite all sorts of tax give-aways that were provided in the hope that businessmen would then borrow more, spend, and expand.