A REAPPRAISAL OF THE CONCEPT, POTENTIALITIES, AND LIMITATIONS OF FISCAL POLICY IN THE AMERICAN ECONOMY*

Abstract

FOR SOME TIME it has been recognized that government has potential social and economic levers in such fiscal tools as taxation, borrowing, spending, and investing. The role that should be played by fiscal policy in using these tools to remedy America's economic and social ills has proved to be one of the most controversial of economic subjects. Not only has this been the result of the variant philosophical attitudes toward the role that government should play in society, but it has also been the result of underlying differences in economic theorizing. The primary objective of the present study was to present an extensive appraisal of the possibilities, deficiencies, and areas for further research in both fiscal policy theory and application in the American economy. To carry out its objective, the thesis has been broken down into five major parts, which (1) analyze the fiscal policy goals and the fiscal policy tools, (2) investigate the underlying economic theory relevant to fiscal policy, (3) examine the techniques and problems in the administration of fiscal policy, (4) develop specific fiscal policy programs for depression, wartime, prosperity, and for the long run, and (5) attempt to appraise the future role of fiscal policy in the American economy. The study makes use of both the inductive and deductive tools of analysis. In the main, it constitutes an analysis, evaluation, coordination, and synthesis of the thought in the field, with frequent reference to statistical data available in the reports and literature to test the conclusions. Conclusions.-Much of the contribution of the paper may lie in an economic analysis of the fiscal process and the suggestion of specific fiscal programs suitable to the economy. Nevertheless, there are a few general conclusions concerning fiscal policy which appear to be somewhat more significant than the rest. (1) Neither the orthodox nor the aggregative schools of economic thought seem