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- | Welcome once again as MIT professor Paul Samuelson | 0:02 |
discusses the current economic scene. | 0:05 | |
This biweekly series is produced | 0:07 | |
by Instructional Dynamics Incorporated | 0:09 | |
and was record July 28th, 1972. | 0:11 | |
- | The year 1972 is half over. | 0:14 |
This is a good time for our stock-taking. | 0:17 | |
The Joint Economic Committee holds | 0:19 | |
its usual summer midyear hearings. | 0:20 | |
We have a rash of new statistics | 0:25 | |
from the Department of Commerce. | 0:27 | |
First every July the Department of Commerce | 0:30 | |
gives us a revision for the last three years | 0:34 | |
of the gross national product | 0:37 | |
and national income statistics. | 0:40 | |
That revision has now come through, | 0:42 | |
and it's been extremely interesting | 0:44 | |
because the numbers have generally speaking | 0:45 | |
been revised upward. | 0:49 | |
This is done on the basis of more complete information | 0:51 | |
available from consumer surveys | 0:54 | |
from the tax returns and so forth. | 0:56 | |
So apparently the total base mark | 1:00 | |
from which we should measure all changes in GNP | 1:05 | |
is to be moved up. | 1:08 | |
For example, the gross national product in 1971 | 1:09 | |
instead of being about 104.7, | 1:15 | |
you should now think of as about 105.0. | 1:18 | |
And any add-on should take place from that number. | 1:22 | |
But more interesting was the fact | 1:27 | |
that the last quarter of 1971 | 1:30 | |
in revised data | 1:34 | |
now shows a real rate of growth | 1:36 | |
of more than six percent. | 1:39 | |
And in the first quarter of the year | 1:43 | |
more than six percent. | 1:46 | |
But you haven't heard anything yet. | 1:48 | |
The second quarter numbers came in, | 1:50 | |
and they were so good | 1:53 | |
that Dr. Herbert Stein, the chairman | 1:54 | |
of the Council of Economic Advisers, | 1:57 | |
joined with Assistant Secretary of Commerce Harold Passer, | 1:59 | |
to give out the glad tidings. | 2:04 | |
Dr. Stein was able to report | 2:07 | |
that the real gross national product | 2:09 | |
grew in the second quarter | 2:12 | |
at an annual rate of 8.9 percent. | 2:13 | |
That means more than 11 percent | 2:16 | |
for the nominal or money GNP annual rate of growth | 2:19 | |
in that quarter. | 2:24 | |
This was made possible because the rate of price increase | 2:26 | |
as measured by the price deflator of the GNP | 2:31 | |
was at only a 2.1 percent annual rate. | 2:36 | |
So although the revised first quarter increase | 2:41 | |
in money GNP was 31 billion and another 30 billion | 2:45 | |
for the second quarter, | 2:48 | |
the spectacular improvement in rate of price increase | 2:50 | |
converted the real increase of something over 6 percent | 2:55 | |
in the first quarter into almost 9 percent | 3:00 | |
in the second quarter. | 3:03 | |
I think this is the proper grounds for jubilation. | 3:06 | |
These are good solid increases, | 3:12 | |
the sort of thing | 3:15 | |
that we've been hoping for for a long time. | 3:16 | |
Moreover, and this was not lost upon Wall Street, | 3:18 | |
which went up as I recall 13 points, | 3:21 | |
10 points immediately on the news | 3:24 | |
in the next trading day 14 points. | 3:26 | |
Since that time, it's been whittled away at. | 3:29 | |
But the great improvement in the rate of price inflation | 3:31 | |
was very encouraging to observers. | 3:35 | |
Apparently those of us, I include myself in this group, | 3:40 | |
who were rather skeptical of the efficacy of phase two | 3:43 | |
to hold on the rate of increase of wages and prices, | 3:46 | |
are coming in for some pleasant surprises. | 3:51 | |
And those people who thought that | 3:54 | |
they had no effect whatsoever, | 3:58 | |
and any effects they would have would be bad, | 3:59 | |
they are perhaps are in for some revisions. | 4:02 | |
Now we can't know what's going to happen. | 4:05 | |
And Dr. Stein very properly pointed this out. | 4:08 | |
He said when there's bad news, | 4:10 | |
we point out that that may change. | 4:11 | |
And when there's good news, it's only proper to point out | 4:13 | |
that it also may change. | 4:16 | |
But let's suppose that the second quarter numbers | 4:20 | |
are not repeated but still | 4:24 | |
that they're telling us something. | 4:26 | |
And even if they go from 2.1 percent to 2.8 percent, | 4:27 | |
2.9 percent to 3.0 percent, | 4:33 | |
it does mean that the administration's goal | 4:35 | |
of having prices increased by only two to three percent | 4:38 | |
by the end of the year | 4:40 | |
may well be realized. | 4:42 | |
And you've heard me say a number of times | 4:44 | |
that as I weighed all the evidence, | 4:47 | |
I did not think that the betting odds favored | 4:49 | |
the realization of that goal. | 4:52 | |
Well let's not try to argue with the facts. | 4:55 | |
The information as it's been coming in | 5:00 | |
has been very good indeed. | 5:05 | |
And I think that augurs for good news ahead in the future. | 5:06 | |
Any flies in the ointment one might point out | 5:13 | |
as Alan Greenspan did | 5:17 | |
just on the eve of the issue of these numbers | 5:19 | |
that the last part of the second quarter | 5:22 | |
didn't seem to be quite as strong | 5:24 | |
as the first part of the quarter. | 5:26 | |
And so if there is to be a revision, | 5:28 | |
and of course the GNP numbers | 5:31 | |
will certainly get revised next July, | 5:34 | |
I suspect that they may be revised a bit | 5:38 | |
on the downward side rather than on the upward side. | 5:41 | |
Let me now run rapidly over the picture as I see it. | 5:49 | |
First the recovery has been broadly based. | 5:54 | |
Employment has been growing rapidly. | 5:57 | |
Labor force has expanded to a remarkable degree. | 6:00 | |
This is because of a trend | 6:03 | |
toward more working wives and mothers. | 6:04 | |
And because of the re-entry | 6:06 | |
of previously discouraged workers. | 6:07 | |
Even the rate of unemployment, | 6:10 | |
which was stubbornly lingering | 6:12 | |
near the six percent level for so long, | 6:14 | |
has dropped for at least one month | 6:16 | |
down to the five and a half percent level. | 6:18 | |
Perhaps that's a wobble. | 6:22 | |
Probably it's a wobble. | 6:23 | |
But I think it is telling us something. | 6:24 | |
It's telling us that the previous 5.9 percent | 6:26 | |
may have been a little bit high, | 6:28 | |
and the 5.5 percent, although it may be low, | 6:30 | |
we might, may be permitted to think of it | 6:34 | |
as about 5.6, 5.7 percent. | 6:36 | |
Now earlier it looked doubtful | 6:41 | |
that election day in November, | 6:43 | |
or let's say the end of the year, | 6:45 | |
would see the unemployment level | 6:46 | |
down to the neighborhood of five percent. | 6:48 | |
You may recall that that was the prediction | 6:50 | |
made by the economic report of the president. | 6:52 | |
And to me, that still looks a bit doubtful. | 6:56 | |
But I think one should realize | 6:59 | |
that President Nixon may well be right | 7:03 | |
in this particular forecast. | 7:06 | |
The first forecast that I remember seeing | 7:09 | |
in which on the basis of the evidence as it now is | 7:13 | |
suggests that by the end of the year, | 7:15 | |
unemployment may be down to five percent, | 7:18 | |
is one that I received just recently | 7:20 | |
from the Wharton School model. | 7:24 | |
It does not embody the revised GNP data. | 7:27 | |
It goes back to the end of May. | 7:31 | |
But as I look at its predicted unemployment numbers, | 7:35 | |
it predicts 5.05 percent | 7:40 | |
in the fourth quarter year. | 7:46 | |
That is certainly in the neighborhood of five percent. | 7:48 | |
And for the first quarter of 1973, | 7:51 | |
it has four and three quarters percent. | 7:54 | |
And for the third quarter, the one we're now in, | 7:56 | |
it has five and a third percent. | 7:59 | |
Five is certainly in between those numbers | 8:01 | |
and it may well be that although this is more optimistic | 8:04 | |
than most of the models that I have on my desk before me, | 8:08 | |
that this could be realized. | 8:12 | |
This brings up a point. | 8:17 | |
The point has to do with the span | 8:22 | |
of forecasts by economists. | 8:25 | |
It has to do also with the problem | 8:28 | |
of different computer forecasts. | 8:32 | |
Before I comment on what accuracy | 8:35 | |
we can attribute to the computer as such, | 8:38 | |
let me mention that in almost the same mailing | 8:41 | |
I received two different typical forecasts of the GNP. | 8:46 | |
One was the Wharton model mailing | 8:52 | |
that I just spoke of. | 8:54 | |
That arrived on my desk July 24th | 8:57 | |
but refers to the end of May. | 9:00 | |
The other is from the Indiana Business Review. | 9:04 | |
For many years the group there have been preparing forecasts | 9:10 | |
over the years, particularly when Professor Truer | 9:14 | |
was devoting his attention to this | 9:19 | |
before he was elevated to a higher administrative position, | 9:23 | |
the forecasts seemed to me to be pretty good. | 9:26 | |
Now the particular forecast I'm looking at now | 9:29 | |
is I think low. | 9:32 | |
And I think is gonna be falsified. | 9:35 | |
It's gonna turn out to be too low. | 9:37 | |
But where I wanna call your attention | 9:39 | |
is the remarkable discrepancy | 9:41 | |
between this forecast which arrived in the mail | 9:44 | |
and another forecast which arrived in the mail, | 9:50 | |
both done by a competent group of economists. | 9:54 | |
Now the Indiana forecasts ends | 9:58 | |
in the second quarter of 1973. | 10:01 | |
So let's just look at its nominal and money GNP | 10:03 | |
1207. | 10:09 | |
As I looked at the second quarter of 1973 | 10:12 | |
in the Wharton model, | 10:17 | |
and that's 1253.7 | 10:18 | |
Call it 1254. | 10:22 | |
There we have a difference of 47 billion dollars | 10:24 | |
just forecasting one year ahead. | 10:28 | |
That's a full four percent difference. | 10:31 | |
And yet the whole growth in this year ahead | 10:34 | |
is only of the order of magnitude of 10 or 11 percent | 10:38 | |
depending upon which of the forecasts you use. | 10:42 | |
So about half of the rate of growth is in doubt | 10:44 | |
if you regarded these two forecasts as equally likely. | 10:49 | |
That suggests to me that in this age | 10:54 | |
of super abundance of forecasts, | 10:57 | |
you really have to have special analytical abilities | 10:59 | |
to choose between the different forecasts. | 11:02 | |
To illustrate this point like I mentioned | 11:07 | |
just a few days ago on July 27th, | 11:09 | |
I testified before the Joint Economic Committee. | 11:12 | |
I was really on a very distinguished panel. | 11:15 | |
Walter Heller, who's been having | 11:18 | |
a very good forecasting record was on it. | 11:19 | |
And John Kenneth Galbraith, who always has | 11:22 | |
something amusing and interesting to say | 11:25 | |
was also on the panel. | 11:27 | |
I think too that the Congressmen and Senators | 11:29 | |
were in pretty good form, | 11:33 | |
in particular Senator Fulbright, | 11:35 | |
who isn't usually present at the Joint Economic Committee | 11:36 | |
because he's so preoccupied with foreign affairs. | 11:39 | |
I was there. | 11:42 | |
Let me read to you what I had to say on this topic. | 11:45 | |
Alienists I'm told have discredited themselves | 11:51 | |
as expert witnesses. | 11:54 | |
For the reason that you can hire one to testify | 11:56 | |
on either side of the case | 11:58 | |
involving a person's sanity or insanity. | 12:00 | |
Although I have never met a computer that could laugh | 12:03 | |
or weep tears or love, | 12:06 | |
we apparently today have Republican computers | 12:08 | |
and Democratic computers. | 12:10 | |
A Chase bank computer, | 12:12 | |
I was referring there to Michael Evans' model | 12:14 | |
for the Chase Econometric organization. | 12:17 | |
Considered of the Chase Manhattan Bank. | 12:21 | |
A Chase bank computer will tell you | 12:24 | |
that McGovern economics will stop GNP growth | 12:26 | |
in its tracks. | 12:28 | |
A Wharton School model or a data resources computer | 12:30 | |
will tell you that this McGovern program | 12:33 | |
is pretty much what, pretty much what the doctor ordered | 12:37 | |
for good health as the GNP vector. | 12:39 | |
Particularly in the long run. | 12:42 | |
However, before we start throwing wooden shoes | 12:44 | |
into the computer works, into the transistors, | 12:47 | |
I should record the fact | 12:50 | |
that literary economists also talk with forked tongues. | 12:51 | |
Literary economics throws up its Rinfrets, | 12:59 | |
its Janeways to predict that the Dow Jones Index | 13:02 | |
will go down to 500. | 13:05 | |
And Pierre Rinfret has been leading that attack | 13:07 | |
that we go down to 500 if that man, that is McGovern, | 13:10 | |
begins to pick up in the Gallup polls | 13:14 | |
and shows some real dangerous signs | 13:15 | |
of going into the White House. | 13:18 | |
But as against this, | 13:20 | |
anyone who reads the letters | 13:22 | |
to the editor of newspapers | 13:24 | |
will realize that there are more assistant professors | 13:26 | |
than you can shake a slide rule at | 13:28 | |
who will aver the opposite that, that well | 13:30 | |
well the McGovern program will be very healthy | 13:34 | |
for the economy. | 13:36 | |
We cannot therefore have the naive scientism | 13:40 | |
of which I sometimes encounter | 13:46 | |
since I'm here at a technological institute. | 13:48 | |
I can remember one of the former president's | 13:52 | |
scientific advisors telling me | 13:56 | |
what you've got to do is to go down before Congress | 13:59 | |
and show them the scientifically accurate | 14:03 | |
output of a computer. | 14:07 | |
Then they'll have to believe you. | 14:08 | |
Well I couldn't help but laugh | 14:10 | |
at the naivete of this. | 14:14 | |
It may well be that there's certain areas | 14:15 | |
of affirmative antics | 14:17 | |
where you can speak | 14:20 | |
with that kind of confidence and precision. | 14:21 | |
Most areas of natural sciences | 14:23 | |
you cannot speak in that arrogant manner. | 14:25 | |
But definitely in the field of economics | 14:30 | |
that is not the case. | 14:33 | |
Those of you who are interested in forecasting | 14:36 | |
might find it valuable | 14:41 | |
to think about a new forecasting method. | 14:43 | |
As you know, as I mentioned on these tapes many times, | 14:50 | |
the monetarist forecasts have a considerable spread. | 14:55 | |
The Federal Reserve Bank of St. Louis | 15:01 | |
has forecasts which are rather on the modest side. | 15:03 | |
That's what the output is of their regression equations. | 15:10 | |
Perhaps somewhere between the Indiana forecast | 15:14 | |
that I mentioned to you | 15:17 | |
and the more fashionable Wharton School | 15:18 | |
and official governmental forecasts. | 15:22 | |
Now you might think from that | 15:26 | |
that monetarism is to be discredited. | 15:27 | |
I don't believe that we are able | 15:30 | |
to follow such a crypto-positivistic philosophy | 15:33 | |
in economics to good advantage. | 15:37 | |
We have to be much more sophisticated. | 15:41 | |
Monetarism is just as good and just as bad this year | 15:42 | |
when let's say one particular set of equations | 15:47 | |
of monetarists, the Federal Reserve Bank | 15:51 | |
ones say of St. Louis, | 15:53 | |
are springing a leak and big residuals as otherwise. | 15:55 | |
Of course over a very long period of time, | 16:00 | |
piecing together all the data and information available, | 16:02 | |
and using judgment, | 16:05 | |
one can choose between the competing theories. | 16:06 | |
But the First National City Bank | 16:11 | |
has a slightly different method | 16:14 | |
And I wrote away to Leif Olson, | 16:16 | |
who is the Vice President of the First National City Bank | 16:20 | |
in charge of economics. | 16:23 | |
And I asked if he could provide me with the equations | 16:25 | |
that underlay the forecasts that were made | 16:30 | |
in their June 1972 monthly economic letter. | 16:33 | |
That's a very valuable letter | 16:38 | |
If any of you do not see it, | 16:39 | |
I think you should write away for it. | 16:41 | |
And he was kind enough to send me | 16:44 | |
the regression equations. | 16:46 | |
Now you won't be interested | 16:49 | |
in having me read off a score of different coefficients. | 16:50 | |
But let me tell you | 16:56 | |
what the general philosophy of this is. | 16:58 | |
First its attempt to forecast the total | 17:01 | |
of money GNP and not build it up from its components. | 17:06 | |
It doesn't try to find out what consumption will be, | 17:12 | |
what housing will be, | 17:15 | |
what each different component will be. | 17:16 | |
Being that at the total and then examine the total | 17:18 | |
and its parts for consistency. | 17:22 | |
Instead it says the most important thing | 17:25 | |
in explaining the rate change of the money, | 17:28 | |
of the money GNP, the nominal GNP, | 17:30 | |
is probably the change in the money supply. | 17:33 | |
This is the good old M1 currency and bank deposits. | 17:39 | |
But this is spread over nine periods, nine quarters | 17:44 | |
including the current quarter. | 17:47 | |
And not just four or five as in the St. Louis model. | 17:48 | |
And not the single quarter | 17:52 | |
as in the model which was used | 17:56 | |
by the Office of Budget Acknowledgement | 18:00 | |
last year, which I commented on | 18:03 | |
in somewhat critical terms. | 18:06 | |
Government expenditure enters | 18:10 | |
in over a four or five quarter period. | 18:12 | |
But it really has a (audio muffled) weight | 18:14 | |
and such total weight as it has is negative. | 18:17 | |
You get little stimulus at the beginning, | 18:21 | |
but it's derisory and negligible. | 18:22 | |
And after three or four quarters, | 18:25 | |
you actually get a stronger amount of negative stimulus. | 18:28 | |
So you could probably wash that out of these equations. | 18:32 | |
Finally they put in, | 18:35 | |
as I understand it as I read the equations, | 18:38 | |
what was happening to the real rate of growth | 18:41 | |
of the GNP of acceleration | 18:43 | |
in that rate of growth of real GNP | 18:46 | |
back about a year and a half ago. | 18:51 | |
Now what's the new wrinkle? | 18:54 | |
The last one, but I don't know how important that is, | 18:57 | |
I'm not sure just exactly why | 19:01 | |
they ever thought to put that in. | 19:03 | |
But I think that there may be some | 19:06 | |
very cogent reason for that. | 19:09 | |
But the new wrinkle is that although | 19:11 | |
they have the money supply growth | 19:13 | |
as the principle mover | 19:18 | |
over nine periods, | 19:20 | |
they don't keep fixed rates. | 19:22 | |
Instead they increase the velocity of circulation of money | 19:25 | |
about the way there was increasing from 1953 to 1968. | 19:28 | |
Rising rather rapidly with time but less rapidly | 19:36 | |
toward the end of the period. | 19:42 | |
When you see what the difference is between this | 19:44 | |
and the St. Louis method, | 19:46 | |
this is a way, this is one way of putting it, | 19:48 | |
of jacking up the St. Louis estimates. | 19:52 | |
If you put it in timeframe | 19:54 | |
you're gonna get lower St. Louis estimates way back | 19:55 | |
and higher ones now. | 19:57 | |
And since what's wrong with the St. Louis estimates | 19:59 | |
is that they're low, | 20:02 | |
I mean in the opinion of most forecasters | 20:04 | |
and of the First National City Bank forecasters apparently, | 20:06 | |
then this gives a better, a better forecast. | 20:10 | |
Now this is really very carefully done. | 20:13 | |
It was fitted to a period of years, 1953, 1968. | 20:17 | |
It was used for our forecasts after 1968. | 20:23 | |
And the general fit is rather good. | 20:27 | |
About 70 percent of the variance to be explained | 20:32 | |
is explained by the equations. | 20:37 | |
The equations weren't doing so well | 20:40 | |
apparently last, end of last year. | 20:42 | |
But with the revisions, it looks as if | 20:47 | |
the equations are gonna be right on the beam. | 20:52 | |
And so the question is will this sort of estimate | 20:54 | |
stay on the beam? | 20:59 | |
I'll try to keep you posted on that matter. | 21:00 | |
For now let me turn though very rapidly | 21:04 | |
to how broad the base of the recovery is. | 21:07 | |
Profits have been going up. | 21:12 | |
If anything, they've been outperforming their expected | 21:13 | |
15 to 20 percent gain over 1971. | 21:17 | |
I think that my estimate in New York back in March | 21:21 | |
that people are underestimating the increase in profits | 21:27 | |
is probably going to be justified, | 21:30 | |
showing that luck sometimes happens. | 21:33 | |
Interest rates, short-term interest rates | 21:38 | |
have not risen very much. | 21:40 | |
They've risen a little. | 21:41 | |
But perhaps because phase two price control's | 21:43 | |
really working well. | 21:47 | |
They haven't risen very much, and long-term rates | 21:48 | |
have been agreeably steady. | 21:51 | |
The only thing which has really been behaving rather poorly | 21:55 | |
in 1972 is the level of common stock prices. | 21:59 | |
For several months now, the Dow Jones Index | 22:03 | |
has been moving sideward or downward. | 22:05 | |
And I'm hearing more and more doubts | 22:07 | |
about the inevitability of the hoped for summer rise | 22:10 | |
and that final successful assault | 22:13 | |
on the previous peak level of 1,000. | 22:15 | |
Now you might say this is surprising | 22:19 | |
since the prospects of better business, of higher profits, | 22:21 | |
and the betting odds certainly as I speak | 22:25 | |
must be strongly in favor of Richard Nixon | 22:28 | |
over George McGovern in the coming November election. | 22:31 | |
And you might have thought this would have succeeded | 22:36 | |
in creating a one-way bull market in equities, | 22:37 | |
particularly since interest rates have not been adverse. | 22:40 | |
Maybe that there's been a great, and I would think, | 22:44 | |
exaggerated concern over the anti-business aspects | 22:48 | |
of McGovern economic programs. | 22:50 | |
And although the probability of these applying | 22:53 | |
is very small, perhaps they're considered | 22:55 | |
to be so very large in their adverse magnitude | 22:58 | |
that they'd be taken in account. | 23:03 | |
Remember Pascal's Wager that the chance of God existing | 23:04 | |
and your burning in hell and not believing in him | 23:11 | |
is very small, but it's so awful, | 23:14 | |
infinitely awful to burn in hell, | 23:16 | |
that you must act on the wager that God does exist. | 23:18 | |
Now perhaps the floating of the British pound | 23:23 | |
and the uneasiness about the viability | 23:25 | |
of the dollar's parity | 23:27 | |
as established in the Smithsonian agreement | 23:29 | |
have helped to explain the skittishness | 23:31 | |
of the equity markets. | 23:33 | |
I should say very briefly that the need | 23:34 | |
of central banks abroad to absorb dollars | 23:38 | |
has accidentally come to the support | 23:40 | |
of the government bond market. | 23:43 | |
Because the central banks abroad | 23:44 | |
put their official settlements' surpluses | 23:46 | |
into very liquid treasury bills. | 23:51 | |
And so the financing of the treasury's been easier. | 23:54 | |
Well housing still continues to be strong. | 23:58 | |
Fixed investment by business | 24:00 | |
has been living up to the increasingly optimistic intentions | 24:02 | |
reported by various surveys of businessmen. | 24:05 | |
Consumers' attitudes have not changed a great deal. | 24:08 | |
They certainly have not improved tremendously. | 24:11 | |
But the intentions to buy automobile is up. | 24:14 | |
And the long awaited drop in the saving ratio | 24:16 | |
finally occurred this year. | 24:18 | |
When partly by unplanned chance, there's been sizable | 24:21 | |
overwithholding of taxes by the government. | 24:24 | |
Thus far the consumer by and large | 24:28 | |
has kept his cool. | 24:29 | |
Inventory accumulation, which has been | 24:31 | |
a moderating element in the picture, | 24:33 | |
has finally begun to pick up a little. | 24:39 | |
In the second quarter, was up to a 4 billion annual rate | 24:40 | |
from only about a four tenths of a billion annual rate | 24:43 | |
in the first quarter. | 24:47 | |
I think this moderation inventory augurs well | 24:49 | |
for the permanence, longevity of the particular expansion. | 24:52 | |
The most troublesome spot seems to me | 24:58 | |
to be the dollar jitters. | 25:02 | |
Which are still with us and which are still infecting | 25:03 | |
the general business outlook. | 25:08 | |
I hope to comment more upon that later. | 25:12 | |
Now the last thing I have to say is | 25:15 | |
that whenever the recovery is proceeding | 25:18 | |
in a very strong way, there is a tendency | 25:23 | |
for the administration. | 25:27 | |
This was also true of the Eisenhower administration, | 25:30 | |
which was definitely untrue of the Kennedy administration, | 25:32 | |
to begin to worry about the pace of expansion. | 25:37 | |
If this is the summer of our content, | 25:42 | |
the administration economists begin to worry | 25:45 | |
about the winter of our excess. | 25:49 | |
And so we've had warnings from Secretary Schultz. | 25:51 | |
We've had warnings from the president. | 25:56 | |
We've had warnings from Arthur Burns | 25:59 | |
that government spending should be brought under control | 26:02 | |
on the presupposition that it is now out of control. | 26:08 | |
I think that the greatest risk to longevity of the boom | 26:15 | |
is this particular kind of caution | 26:19 | |
which can stand everything but success. | 26:23 | |
And by contrast, I myself would favor a view | 26:27 | |
which says that there is a short-term trade-off | 26:33 | |
between risk of inflation | 26:36 | |
and risk of aborting the boom. | 26:40 | |
That one should be very (mumbles) | 26:43 | |
of letting anything | 26:50 | |
abort the boom prematurely or turn it into a slow | 26:52 | |
and again anemic rise. | 26:56 | |
Until we've brought the rate of unemployment down, | 26:59 | |
if not all the way to four percent, | 27:04 | |
in that amended four plus percent | 27:06 | |
to allow something for the changes in demography. | 27:11 | |
And I am fearful | 27:16 | |
that if the election | 27:19 | |
is a very strong one | 27:23 | |
in favor of the Republican party, | 27:25 | |
that we may learn | 27:29 | |
that the expansionism | 27:33 | |
which the administration together with Congress | 27:35 | |
has created and which the Federal Reserve has joined in | 27:39 | |
and which I think is good | 27:42 | |
for the long-run health of the economy | 27:45 | |
with that expansionism may be brought | 27:48 | |
to too precipitous an end. | 27:51 | |
I hope I'm wrong in that. | 27:53 | |
- | If you have any comments or questions | 27:55 |
for Professor Samuelson, | 27:57 | |
address them to Instructional Dynamics Incorporated | 27:58 | |
166 East Superior Street Chicago, Illinois 60611. | 28:01 |
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