The Personal Tax Surcharge and Consumer Demand, 1968-70

Arthur M. Okun

AMO

Arthur M. Okun

THE REVENUE AND EXPENDITURE CONTROL ACT of 1968 was the key measure responsible for a large fiscal swing toward restraint from a full employment deficit of roughly $10 billion in the first half of 1968 to a full employment surplus of about the same size in the first half of 1969. That fiscal restraint was intended to halt the boom and thereby to curb inflation. As everyone knows, it did not stop inflation—nor has any of the host of other economic policy actions undertaken in the United States since 1967. The linkage between halting a boom and curbing inflation has turned out to be a much more difficult and less reliable process than the profession judged three years ago.