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BPEA Article

The Full Employment Surplus Revisited



THE CURRENT EFFORT of fiscal and monetary policy makers to achieve disinflation without recession has put the spotlight of public attention once again on the federal budget—as well as on monetary policy and the state of private demand. Some of the discussion of the budgetary impact on the economy has focused on the recent and prospective disappearance of the federal surplus. The surplus of the federal sector in the national accounts, which was $13.5 billion (annual rate) in the second quarter of 1969, virtually vanishes in the first half of 1970. Moreover, some who have predicted that the President's budgetary program for fiscal 1971 will actually turn out in deficit have interpreted such an outcome as a shift toward stimulus in fiscal policy.


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