Word: deficits
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Dates: during 1970-1979
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Economists, proud and powerful in the 1960s, now look like Napoleon's generals decamping from Moscow. Their past prescriptions ?tax tinkering and Government deficit spending to prop up demand, wage and price guidelines to hold down inflation?have been as helpful as snake oil. "Things just do not work now as they used to," says former Federal Reserve Chairman Arthur Burns, and who can contradict him? The U.S. economy, bloated and immobilized, has been turned topsy-turvy...
Between 1889 and 1970, the nation ran a trade deficit only once, in the midst of the Depression, in 1935. Yet since 1971, the combination of low productivity and high inflation has reduced both the supply and the competitiveness of U.S. products. Consequently, export growth has been sluggish, and foreign goods have poured into the U.S. at an ever increasing rate. Coupled with the nation's increasing dependence on foreign oil, this has meant that the U.S. has managed to eke out a trade surplus only twice since 1971, running up a cumulative deficit of $59 billion in those years...
...Senate was also uneasy about approving such an expensive program because the budget deficit is ominously rising. Congress set a goal of a $23 billion deficit for fiscal 1980 with the intention of balancing the budget the following year. But inflation has wrecked these plans, and additional spending is expected. To get SALT II approved, its supporters will probably have to agree to increased defense outlays of as much as $7 billion. The recession may trigger further spending; a jump of 2% in the unemployment rate could add $40 billion to the deficit because of lower tax revenues and higher...
Still, Congress seems to favor doing something for Chrysler, although $1 billion in tax refunds is distasteful to legislators who yearn to narrow the federal deficit. They may move instead for a loan guarantee. Senate Finance Committee Chairman Russell Long has pledged some aid for Chrysler. Says he: "It is better than letting the company fold. That would cost a lot of revenue and jobs." House Ways and Means Chairman Al Ullman is unenthusiastic but promises to expedite whatever bailout measures the Carter Administration proposes...
Even such a fractional rise will irritate inflation-squeezed Americans. Nonetheless, higher exports of U.S. farm products are the best hope for reducing the nation's trade deficit, which is caused largely by oil imports. Since America's appetite for foreign oil will remain intense, it is necessary to sell more food abroad even if that means slightly higher supermarket bills at home...