Morton B. Millenson

English

Research Papers in Economics

    n     n   ht 
  d r l  p nd n  l     xp  t t  n 
  d r l   v rn  nt  p nd n  h   b  n r n 
n n    b t nt  ll  b l   f r    t    n   th 
b   nn n   f   n  r . Alth   h th     t r  
  nt C n r     n l t r  t f r  p nd n  d r 
 n  f    l      ( nd n  S pt  b r  0        t
 t $4   b ll  n,   t  l  p nd n  d r n  th 
  n  r  M r h    rt r      t  n   t   t d
 nn  l r t   f $  8 b ll  n?
 h    h rtf ll  n  p nd n    n     n  r   
    n   r  d   ntr  t t   h t     rr d d r n 
th  f r t    rt r  f f    l      (O t b r 
     b r    6   h n  p nd n       t  n    
t   t d  nn  l r t   f $4   b ll  n. 2  h   r t 
     n l n    th th  l v l   t  n th  S   nd
C n r     n l   d  t     l t  n, $4  . 
b ll  n, p    d S pt  b r  6,    6.  h t
r   l t  n   t bl  h d th   p nd n  t r  t  n
 ff  t pr  r t   r   d nt C rt r   r     t f r
 h n     n th  b d  t d t d   br  r   .  h 
 h rd   d  t     l t  n     p    d b  C n 
 r     n M r h  ,      t         d t  th 
n   Ad  n  tr t  n   r     t f r  dd t  n l
 t   l   t  th     n   .
  r n  f    6
 h    rr nt  h rtf ll  n f d r l   v rn 
  nt  p nd n  r p  t  th   xp r  n    f th 
    nd  nd th rd    rt r   f    6.  h n, t  ,
f d r l  p nd n  dr pp d   b t nt  ll 
b l    xp  t d r t  . A    r   lt t t l  p nd 
 n  d r n  f    l    6     $ 66 b ll  n  n t  d
 f th   xp  t d $  4 b ll  n.   r n  th      
 nd    rt r  f    6 (th  f n l    rt r  f f    l
   6  th  Off     f M n     nt  nd   d  t
(OM         t d th t th  l   r th n  x 
p  t d  p nd n  h d     rr d b        f th 
 h n    n t   n   f th  f    l    r.    t r   l 
 U.S.  r    r  d t ,  dj  t d f r      n l v r  t  n
 nd tr nd.
2S   n t   .
l , f d r l    n     h v      l r t d  p nd 
 n  t   rd th   nd  f    h f    l    r t  pr  
v nt th  l p    f  p nd n    th r t .
    v r,  nd r th  n   b d  t pr   d r 
th  t   n   f th  f    l    r      h n  d.
     l    6     th  l  t f    l    r  nd n    n 
 0.  h    l  S pt  b r    rt r    
  h d l d      tr n  t  n    rt r b t   n
f    l    6  nd f    l     , b t  p nd n  pl n 
h d b  n   d  f r th   nt r       nth
p r  d fr     l   ,     , thr   h S pt  b r
 0,    6, r th r th n f r th      l  2   nth .
OM   xp  t d th   h rtf ll  n  p nd n  t  b 
  d   p d r n  th  tr n  t  n    rt r, b t
th   d d n t     r. A t  l  p nd n  d r n  th 
tr n  t  n    rt r     $   b ll  n  n t  d  f
th  $ 02 b ll  n OM  pr d  t d  h n th 
   rt r b   n.
In O t b r  f l  t    r th  C n r     n l
  d  t Off    (C O  r l    d  n  n l      f
 p nd n  d r n  f    l    6  nd th  tr n  t  n
   rt r,  nd   n l d d th t th   h rtf ll  n
 p nd n  h d     rr d  v r   br  d  p   
tr    f    n      nd d p rt  nt . C O
      t d   n  b r  f r    n  f r th   h rt 
f ll:
• Infl t  n     l   r th n h d b  n  n 
t   p t d  h n  p nd n      pl nn d.
• Int r  t r t    nd f d r l b rr   n 
  r  b th l   r th n f r    t, l   r n 
t t l  nt r  t    t .
• S l    f   v rn  nt     t  (n   t v   x 
p nd t r     x   d d pl n .
• S v r l pr  r   , p rt   l rl  pr   r  
  nt f r d f n  , pr    d d  l   r th n
pl nn d.
•   p rt  nt b d  t   n l d d l r  r 
th n n r  l   nt n  n      h  h h d
  n   n   d.
On Apr l 22 OM  n t f  d C n r    th t
 p nd n      l    n  t r  t   nd  t t d th t  t
n    xp  t   p nd n  f r f    l      t  t t l
  d r l     rv    n   f Ch     	   h  f d r l   d  t—An On   n   r     
 h  C n r     n l   d  t A t  f    4 pr v d     f r  l   l nd r  f  t p   n th 
d v l p  nt  nd   ntr l  f th  f d r l b d  t.  h     h d l   xt nd  fr  
  v  b r  0, n  rl       r b f r    p rt   l r f    l    r b   n ,  nt l   l      f th t
f    l    r,    p n  f 20   nth . S      p  t   f b d  t pl nn n   nd   ntr l b  b th
C n r     nd th   x   t v  br n h, th r f r ,     r     lt n    l  f r th    rr nt
f    l    r  nd t         d n     r .  h    j r d  dl n    n th    l nd r  r  l  t d
b l  . Ch n        b    d   t  th   t      f n      r .
  v  b r  0    r   d nt   b  t  th  "  rr nt   rv       t   t  " f r th  n xt f    l
   r t  C n r   .  h   d     nt pr v d     t   t    f b d  t
  th r t   nd   tl    n  d d       n  n   h n    n pr  r     r
l v l   f   t v t .
  n  r  
M r h   	  
Apr l  	  
Apr l   
M     
S pt  b r2
S pt  b r   
S pt  b r 2 
 r   d nt   b  t  " h    d  t  f th  U.S. G v rn  nt" t  C n r   .
 h   d     nt   v   th  Ad  n  tr t  n   d t  l d pl n f r th  n xt
f    l    r,  n l d n  n    nd  h n  d pr  r   , t x  h n   ,  nd
th     n          pt  n   n  h  h th  pl n    b   d.  r p   d
  rd n   f    h  ppr pr  t  n  b ll     n l d d  n  n App nd x.
C    tt     n    h h      f C n r      b  t r p rt  t  th  r
r  p  t v  b d  t      tt      v n        t d b d  t   t  n  n
th  r  r     f j r  d  t  n.
C n r     n l   d  t Off      b  t  r p rt t  b d  t      tt   
 n l z n  th    p  t  f th  b d  t  n th     n     nd
r      nd n   n  ppr pr  t  f    l p l   .
O t b r  
Apr l  0
  l    
    d  t C    tt     n b th h      r p rt th  r pr p   d v r   n   f
" h    r t C n  rr nt     l t  n  n th    d  t" r      nd n 
   l n    n   th r z t  n   nd   tl   ,   fl  r f r r v n   , d t  l d
 ll   t  n   f  p nd n  b    j r f n t  n ,  nd,  f n  d d,    h n  
 n th  f d r l d bt l   t.
  C n r     d pt  " h    r t C n  rr nt     l t  n  n th    d  t."
  C n r       pl t     t  n  n  ll b ll  pr v d n  b d  t   th r t .
  C n r     d pt  "S   nd C n  rr nt     l t  n  n th    d  t."
  C n r     d pt  "    n  l  t  n   ll" t   dj  t pr v     l    l t  n
f r   nf r  t    th     nd b d  t r   l t  n.
       l    r b   n .
   r   d nt   b  t  b d  t  pd t  r     t n   h n       n  d d f r
       d t n  n  l   n  t d pr  r   , n   pr p   l  b  th  Ad 
  n  tr t  n,  nd  h n  d    n          pt  n ,  f  n .
   r   d nt   b  t      nd b d  t  pd t ,  f n  d d.
   ft  n d     ft r C n r    b   n .
z n        ft r   b r    .
4
	
E  n       r p  t v    d  t   t   t    nd r   lt 
f r t	 S   nd	   n l
     l    r   t   t  	   t   t  	 r   lt
(b ll  n d ll r  
 . Sp nd n 
   0   4. 	    .0   6.6
     200 	 2 2.8 2  .4
   2 22 .2	 2 6.6 2  . 
     246. 	 24 .8 246. 
   4 268. 	 2 4.  268.4
      04.4	    .4  24.6
   6  4 .4	    .   66. 
 r n  t  n Q   8.0	  02.   4. 
    4   4.2	 4  .4 408.2 (  t. 
b. S rpl    r d f   t (  
   0 4.  8. 	 (2.8 
     2.0	 ( 8.6  (2 .0 
   2 (  .6  ( 8.8 	 (2 .2 
     (2 .   24.  	 ( 4.  
   4  2.   (4.  	 ( .  
     ( .4   4.6 	 (4 .6 
   6   .8  ( 6.0 	 (66.  
 r n  t  n Q   6.   20.0 	 ( 2.  
    4 (42.   68.0 	 (48.   (  t. 
 S x   nth  pr  r t  th   t rt  f f    l    r.
 S x   nth   ft r th   t rt  f f    l    r.
 f r th  tr n  t  n    rt r th  f r t   t   t     
 n l d d  n th         d  t        .  h      nd    
t   t           d  n th       b d  t  pd t   n   l   6,
   6  nd     n t  h n  d d r n  th     rt r.
  h  f r t   t   t     th  b d  t   b  tt d b  th 
  rd Ad  n  tr t  n.          f th   h ft  n th  f    l    r
th     t   t       b  t n n    nth  pr  r t  th   t rt n 
d t  r th r th n th    x   nth  f r   rl  r    r .  h 
    nd   t    t        b  tt d b  th  C rt r Ad  n  tr  
t  n  n th     8   d  t r v    n ,      d   br  r  22,
    .  h  f n l r   lt    th  OM    t   t  f   d Apr l.
$408 b ll  n.  h       nt     n l n    th th 
 v r    r t   f  p nd n  d r n  th  f r t   x
  nth   f th  f    l    r, b t  v n t  r   h
th   l v l   ll r    r    l r    n r      n
 p nd n   v r th  r t   f th    n  r  M r h
p r  d. OM   xpl  n d th  r l   r d    
t   t   f r f    l       p nd n    th   v r l  f
th       r    n    t f rth  n th  C O  n l    
 f th   v r  t   t    f    6.  h    dd d th 
        t  n r  n t  th   h d  nd rl n d
d r n     6. M  t  f th   n p nt f nd  r  
   n   th r z d,    th t   t   t    f  p nd 
 n     ld    n  fr   b  n  t   h  h t  b  n 
t   l    n    8  nd l t r    r .  h      p r 
t   l rl  tr   f r f    l    8   n         f th 
 t   l   pr v d d b  th   r   d nt   pl n f r
         n t  pp  r      t  l  p nd n   nt l
 ft r    8 b   n .
S     b  rv r  h v        t d th t th 
 h n    n th  Ad  n  tr t  n          nt f r
p rt  f th  l    n  p nd n .   l     n f ll n 
    nd l v l p l     nd  d  n  tr t v 
p   t  n   nd  n   pl   nt n  pr  r     f
th  n    d  n  tr t  n h v  r   lt d  n
 p nd n  b   d  n th   r   n l f    l     
b d  t   b  tt d b   r   d nt   rd  n
  n  r     6.  h t b d  t h d   ll d f r  p nd 
 n   f $    b ll  n f r th  f    l    r,  v r $20
b ll  n l    th n th  n   Ad  n  tr t  n  
pr p   l. Alth   h  r   d nt   rd r    d h  
  t   t   f f    l       p nd n  t  $4   b ll  n
 n th    n  r       b d  t        , th    n 
 r      n pl nn d  p nd n  d d n t  h    p
 n th    t  l  p nd n   n   n  r , h   l  t
  nth  n  ff   . S n   th n d p rt  nt l
 p nd n  h   r    n d  t   r  tr  n d l v l
 h l   r   d nt C rt r  nd h     b rd n t  
tr n l t d th  r pl n   nt  d t  l d   t  n.
  ff   lt   n   t   t n   h t   v rn  nt
 p nd n    ll b  h   n t b  n   nf n d t  th 
   t r   nt t      r .   rth r  r , th 
t nd n   h   b  n t  r   l rl   v r  t   t 
 p nd n    x   nth  b f r  th   nd  f th 
f    l    r. S n   f    l    0 th    t   t  
  d    x   nth   h  d h v   nd r  t   t d
 p nd n   nl  t    ,  n    0  nd    4.
  r    t n  th  d f   t     r t l  h   pr v n
t  b   v n   r  d ff   lt. OM    rr ntl    
 n    d  n     j r  ff rt t    pr v  th 
   l t   f b d  t   t   t  . Unf rt n t l 
  d r l     rv    n   f Ch     
th  r t         d  v r  d ff   lt b  th    z   f
th  n  b r   nv lv d. An  rr r  f   p r  nt
 n f r    t n    rr  p nd  t   n  b  l t 
 rr r  f  v r $4 b ll  n.
Sh rtf ll  nd th     n   
  r n  th    rr nt  nd th     6 p r  d 
 f   v rn  nt  p nd n  l   ,   v rn  nt
r    pt  r    n d r   hl   n l n    th  xp   
t t  n ,    th   h rtf ll  n  p nd n         
   p n  d b      rr  p nd n  d  r      n
th  f d r l d f   t.   r n  f    l    6  nd th 
tr n  t  n    rt r t   n t   th r,  p nd n 
t t l d $46  b ll  n, $ 2 b ll  n b l   th     
t   t   f M r h    6.  h  d f   t f r th  t  
p r  d     b n d     $   b ll  n,  b  t $ 4
 b ll  n d  l r 
— 80
60
 h n    n t t l
f d r l  p nd n 
40
 h n    n r t   f
 nv nt r        l t  n — 20
0
  20
 Q 4Q Q 2Q  Q 4Q  Q
    	   6	    
 4 4Q  Q 2Q  Q 4Q  Q   
    	   6	    
40
 h     6 G    l  d  n
b ll  n d ll r 
80	      n ll   dj  t d
 nn  l r t 
60
 h n    n G  
 h n    n
f d r l d f   t 
20
0
20
 Q 4Q  Q 2Q  Q 4Q  Q	  Q 4Q  Q 2Q  Q 4Q Q
    	   6	    	     	   6	    
     t v  f   r   nd   t    n r    n  d f   t.
   r l   n r .
b ll  n b l   th   xp  t d l v l. It    n      
t   t d th t th  f    l      d f   t   ll b 
 b  t $20 b ll  n l    th n th  $68 b ll  n
f r    t b  OM   n th    br  r  b d  t
r v    n        .  r pp n   f th  r b t     
   nt  f r p rt  f th  r d   d   t   t   f
th  d f   t b t  b  t h lf th  r d  t  n r   lt 
fr   l   r th n  xp  t d  p nd n . M n 
   n    t  b l  v  th t th  l   r th n 
 xp  t d l v l   f   v rn  nt  p nd n ,  nd
p rh p    r    p rt nt, th     ll r th n 
 xp  t d d f   t   ntr b t d    n f   ntl  t 
th   l  d  n  n G    r  th  h  h     rr d
d r n     6. Oth r    n    t , h   v r,
      t th t th  l    n   v rn  nt  p nd n 
  r l  h pp n d t     n  d    th  n  nv n 
t r   dj  t  nt f ll   n  th  b      n 
t   rd  nv nt r        l t  n  h  h    
  rr d  n th  f r t    rt r  f    6. Wh n th 
   rt rl   h n     n G    r  th,   v rn 
  nt  p nd n ,  nd th   h n     n th  r t   f
 nv nt r   nv  t  nt  r   x   n d th r   r 
 n   h     l r t    t        t   p  t fr  
b th   v rn  nt   t  n  nd  nv nt r   d 
j  t  nt   r  f  t r .
 h  t      rt r    th th  l    t  r  th
 n G   f ll   d th  t      rt r   f  l   
d  n  n f d r l  p nd n    th    n     rt r
l  ,  nd th    r  r p d  r  th d r n        I
f ll   d t      rt r   f   r  r p d  n r    
 n f d r l  p nd n .  h    z   n th   h n    f
G    h n  d fr   th  pr v        rt r  n
th       d r  t  n    th   h n    n r t   f  n 
v nt r        l t  n  n  v r     rt r   n  
           x  pt th  l  t    rt r  f    6.  h 
 h n    n th    z   f th  d f   t fr      rt r
t     rt r d    n t  h    n   l  r
r l t  n h p   th th   h n     n G  .
    rdl     f th   tt t d  t   rd th     
p rt n    f th   h rtf ll  n   v rn  nt
 p nd n  d r n     6,    t  b  rv r  l   
 p n th    rr nt  h rtf ll      f v r bl  f   
t r f r th     n    f r th  r  t  f     .  h 
l   r d f   t      p n  n  th   l   r
 r  th  f  p nd n        t  th t  nt r  t
r t     ll b  l   r th n th    th r        ht
b ,  n   r   n    p t l  xp n   n b  th 
pr v t     t r.   rth r  r , th  l   r f d r l
 p nd n  n      n  th t th   n r       n
 p nd n   v r th  n xt f      r   r   dd d t 
  l   r b   .  h   h n    f r pr  r    v 
r d  t  n   n th  d f   t  r  th    nh n  d.
M rt n  . M ll n  n
I	 I
E  n       r p  t v   6

Business insights: Federal spending lags expectations

http://www.chicagofed.org/digital_assets/publications/economic_perspectives/1977/ep_may_jun1977_part1_millenson.pdf

Business insights: Federal spending lags expectations

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Research Papers in Economics