The employment effects of every dollar increase in the deficit will depend on whether it is spent on goods and services such as infrastructure or is the result of tax reduction or increases in government transfer outlays such as unemployment compensation.

What can be done to cushion the current decline and hasten economic recovery? The agenda for helping consumers and boosting the economy should begin with help for the poor and the unemployed.

The West German Council of Economic Experts has proposed an intermediate-range view of fiscal policy which they describe as the cyclically neutral budget (CNB). The first step in constructing the CNB is to select a base year of full employment during which the posture of fiscal policy was,...