About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

1985 AEI Economist 1 (1985)

handle is hein.amenin/aeieco1985 and id is 1 raw text is: 0 the a economist /American Enterprise Institute for Public Policy Research January 1985 The Performance of the Econony: Deficits, Inflation and Growth Herbert Stein, editor On December 3, 1984, as part of its annual Public Policy Week, the American Enterprise Institute held a meeting on The Performance of the Economy: Deficits, Inflation, and Growth at which about forty economists and other experts participated. The session was opened with presentations by Rudolph Penner, director of the Congressional Budget Office Phillip Cagan, director of AEI's Contemporary Economic Problems study William Niskanen, member of the President's Council of Economic Advisers Manley Johnson, assistant secretary of the Treasury for economic policy The remarks of these four panelists are summarized here, together with the highlights of the discussion by other participants. That is followed by a brief commentary by the editor. Rudolph Penner There is little evidence that the current slowdown of the economy will degenerate into a recession. The Congres- sional Budget Office's estimates of the budget outlook for the next five years, on the basis of existing policies has not changed drastically since the latest estimates were published in August. The slowdown of late 1984 and early 1985 looks a little sharper than had been predicted earlier, and this somewhat reduces the revenue projec- tions. At the same time, there is a little larger reduction of interest rates, and that reduces the projected budget expenditures.* Until recently the five-year economic projections that underlay the CBO's budget projections reflected the as- *The CBO projections made in August 1984 showed the following deficits, by fiscal years- FY 1985 $178 billion FY 1986 $195 billion FY 1987 $216 billion FY 1988 $238 billion FY 1989 $263 billion sumption that certain economic goals would be achieved. For example, it was commonly assumed that full em- ployment would be achieved at least by the end of the five-year period. The present procedure is to base the projections on the observed long-term trends of the econ- omy. This method is much less likely to yield overopti- mistic results than the previous method. In the post-World War II period the average annual growth rate of real GNP in the seven years following the trough of a recession was 4 percent. The repetition of this experience would imply an average annual rate of 3-3'/2 percent from 1984 to 1989, since the increase from 1982 to 1984, in the early phase of the recovery, exceeded 4 percent. This calculation is the basis for the CBO's pro- jection of real output to 1989. The range around this 4 percent average growth rate for seven-year periods has been from 3 percent to 5 percent, so that the possible departures from the CBO projection are not great unless Are Economists Getting a Bum Rap? by Herbert Stein Page 5 The AEI Economist I I

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most