In the arena : a memoir of the 20th century by unknow

Author:unknow
Language: eng
Format: epub
Tags: Weinberger, Caspar W, United States. Dept. of Defense, Cabinet officers
Publisher: Washington, DC : Regnery ; Lanham, MD : Distributed to the trade by National Book Network
Published: 2001-06-22T19:00:00+00:00

Another means by which President Nixon addressed the problem of inflation was the use of the so-called Full Employment Budget. As the presidents 1972 reelection campaign factbook explained, "By pursuing a policy of deficit spending at the level of full-employment revenues, sufficient expansion of the economy is assured to provide full employment, increased federal revenues, and thus automatically remove the deficit and excess economic stimulation before its effects lead to inflation [emphasis added]." In simpler terms, the Full Employment Budget was based on what the revenues and expenditures would be if the economy were at full employment. The theory was that if more people were working, they would pay more taxes, which would bring in more revenues, and at the same time government expenditures would be less because unemployment insurance and other federal relief payments would be low.

George Shultz was a big advocate of the Full Employment Budget. I most definitely was not. Operating as if the economy were at full employment was little more than a method of presenting things to look better than they really were, and a way of enabling political speakers to claim balance even though the actual budget was quite badly out of balance. It had no real effect on tax receipts or on the allocation of money to any departments or programs; Congress still looked at the actual numbers and I continued trying to balance the actual budget. I felt that anything we did to mask how large the deficit really was would weaken our attempt to cut spending.

As had been the case in California, only about 25 percent of the federal government's spending was discretionary—the rest was legally required, as written into the funding provisions of almost innumerable programs. These usually start as a pilot project, which turns into an essential program in about three years and becomes an urgent priority in three years more. The distance from an urgent priority to an untouchable sacred cow is usually no more than five fiscal years.

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