Deficit Finance, Inflation and Growth

I welcome the opportunity to appear before the Committee to Investigate a Balanced Federal Budget. Few subjects have received more attention and provoked more controversy than the subjects of budget deficits and deficit finance. I have tried to respond to many of the questions in Dr. Noller's letter by providing some background against which my answers may be interpreted. I discuss the effect of the budget on inflation first. Then I discuss the budget and interest rates and the problem of "crowding out." I will be pleased to develop my answers more fully or to respond to other questions as time and your interest permit.