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 sharp and continuing increase in the cost of oil is hitting the economy on the demand side, as consumers buy fewer goods because they have to pay more for gasoline, and on the supply side, as rising energy prices work their way into the cost structure.