 designed to quell inflation once and for all, he made much of the fact that the new policy was on for the duration. No more starts and stops. When Ronald Reagan embarked on the most expansive fiscal policy in history, he locked his policy in place three years in advance. No turning back. 1983 and 1984 were years of growth in the American economy, but, as the economy grew, the budget deficit grew even faster. By 1985, many economists felt that fiscal policy was dead
a casualty of the towering deficit.
In 1985, the sour notes in our economic performance
warned that problems of inflation and unemployment were still with us. But the
consensus of the economic community was that the most effective response was a
policy of coarse-turning rather than the more active management of an earlier
Comment and Analysis by Richard Gill
Back in the 1950s and 1960s, the Keynesian view was dominant. With slight turns of the rudder of monetary and especially fiscal policy, one could, most economists felt, steer the economic ship past inflation and of unemployment. But today even Neo-Keynesians concede that economic navigation may be less of an exact science than was once imagined. In general, the shift of emphasis from fine-tuning to coarse-tuning has been a shift in time perspective from the short to the longer run. Active intervention in the short run, many economists now feel, may only intensify our longer-run problems.
Unfortunately, there is no real agreement as to what the truly important long-run factors are.