Economic Outlook for the United States Deficit

Guest columnist shares his carefully researched views on the current economic outlook for the United States deficit.

| November/December 1985

  • Economic outlook for the United States
    Surprisingly, after a decade of difficulties, setbacks, and double-digit inflation, the Federal Reserve seems to have adopted a policy capable of keeping inflation under control.

  • Economic outlook for the United States

Mark Rapp shares the economic outlook for the United States deficit.  

A few months back, Mr. Mark Rapp wrote to us and shared his insights into some of the information printed in the then current issue's Economic Outlook column. We were quite impressed, both with Mr. Rapp's careful research into the economic situation and with his ability to apply his own interpretive skills to that carefully gathered data in order to reach clear, incisive, and sometimes surprising conclusions. To make a long story short, we invited Mark to write a guest column for us, and we're pleased to present his first effort here. 

It seems to have become fashionable these days to regard economics as an imprecise and inexact science. We've been hearing a lot of this sort of talk from Washington lately (especially when some economic specialist comes up with something that's less than positive about the U.S. economy). Ironically, though, even some of the "established" economic experts are beginning to admit that forecasting is less accurate than it was a decade ago.

There are several reasons for the present quandary when trying to understand the economic outlook for the United States deficit. The predictions that most often make it into the news are "unconditional" forecasts, but economists can hardly be expected to foresee all the actions of our government, OPEC, foreign investors, the weather, or other outside influences. It is, of course, also dangerous to oversimplify a complex situation, but that's exactly the manner in which many predictions are presented to the public. The bottom line is that the effects of unpredictable factors have made economic forecasting extremely arduous.

However, everybody still wants predictions. Everyone wants to know, Is supply-side economics working? It would be difficult to answer that question, though, because the answer depends on a great number of factors. It would be better to make the question more specific and ask, for whom is it working? But again, we must be careful. A lot depends on the vocation or political orientation of the person in question—on whether he or she is someone helping to rebuild the "arsenal of democracy" or a midwestern farmer. Simple answers are hard to come by these days.

Surprisingly, after a decade of difficulties, setbacks, and double-digit inflation, the Federal Reserve seems to have adopted a policy capable of keeping inflation under control. While supply-siders are taking a lot of the credit for low inflation, I'm sure the mem bers of the Federal Reserve Board are breathing a heavy sigh of relief over currently declining oil prices. For now, it looks as if the Fed's generally tight monetary policy has eased the inflation rate down to an acceptable level. How long it will stay there remains to be seen. Present economic events could easily lead to renewed inflation, as we'll see in a moment.

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