-2-
billion
this
year and a declining deficit
in
fiscal
1983
and
beyond. The falling deficit projection relies upon a moreexpansive economy than projected by the staff as well as imposition
of
larger expenditure
cuts
and tax raising measures.
On
a
high
employment basis--the bottom panel-the budget swings into deeer deficit
in
1982 and 1983, drivenimportantly by the personatax
cuts
scheduled for the middleof each year. The very
st
mulative posture
of
the fiscalside
runs
against
what
we nterpret as a rather restrictivemonetary policy, as indicated in the next
chart.
Growth
of
M1,
although somewhat higher this year than last,
is
stillassumed at a rate well below other recent years. Given ourview
of
the strength of spending and associated credit demands,
it
seems likely that holding down M1growth will result
in
a maintenance
of
high
interest
rates
as
shown
in
the bottompanel.
Mr.
Zeisel
will
continue the presentation
with
a discussion
of
recent and prospective nonfinancial developmentsin the domestic economy.
*****
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