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That would be a welcome development because it is reasonable to wonder just how much more inflation the U.S. can safely absorb. A nation that hardly noticed when prices inched up, on average, little more than 1% a year during the 1950s and early 1960s, now endures such rises every month. The jarring discovery that the prudent no longer save for tomorrow but spend their dollars as soon as they get them has shaken not only the American economy but also the American psyche. Since 1970, the U.S. has become a nation of spendthrifts, and the personal-saving rate has slipped from 7.4% to 5.2% of aftertax income, the lowest among all industrial nations. The saving slump, which starves investment and feeds consumption, reflects the inflationary attitude of "buy it now" or, worse, "borrow to buy it now." Whatever "it" is will probably cost more tomorrow.
The new economists have no monopoly on accurate diagnoses of the inflation malady. Economists everywhere agree that excessive federal spending, too rapid expansion of money, too much costly regulation by Government have been among the primary causes. But many of the experts admit to being puzzled about possible cures. This bafflement is not shared by the new economists. Observes former Treasury Secretary W. Michael Blumenthal: "Economists from the 1940s and 1950s just did not have a decent theory for productivity or inflation. It is only the new generation of Ph.D.s from the end of the 1960s onward who are asking these questions." On the other hand, the solutions they propose will hardly be easy. Among the recommendations:
> Adopt consistent, year-after-year policies of moderate monetary growth so that inflation will be held back and people can plan ahead intelligently.
> Give long-term tax incentives to encourage saving and investment by individuals, entrepreneurs and companies.
> Avoid quickie tax cuts or fiddling with the federal deficit to stimulate consumer spending, and work instead to balance the budget.
> Reduce Government spending, in particular so-called uncontrollables such as social and pension programs that are committed by previous acts of Congress to rise and rise; by cutting spending, more money, more of the nation's capital will be made available to job-creating private businesses.
> Soften or scrap wasteful and production-retarding Government regulations that devour capital but produce no wealth.
> Restrict Government's overall role in the economy in order to enhance personal incentive.
> Above all, stimulate increased supply and production instead of increased demand and consumption.
The case for more consistency and less short-term meddling reflects the spreading awareness that efforts to manage effectively a complex $2.3 trillion economy is hopelessly beyond any government's power. Admits one of the new economists, Thomas Sargent, 36, of the University of Minnesota: "We just don't have the kinds of detailed knowledge to fine-tune the economy. We are further from that goal than we were ten years ago."