A letter from Charles L. Schultze (LBJ’s Director of the Bureau of the Budget and later Carter’s Chair of the Council of Economic Advisers) to Senator John McClellan (D-AK), as quoted in the Congressional Record, 16 August 1974:
The evidence emphatically refutes the popularly held view that government deficits and profligate government spending are the chief causes of recent inflation: and (2) under current conditions a substantial cut in federal spending would add to unemployment and virtually guarantee a serious recession, without significantly reducing the rate of inflation in the next year.
Budget Director Roy Ash has been quoted (New York Times, June 27, 1974) as estimating that a $5 billion reduction in federal spending would reduce the inflation rate by only one-tenth of one percent. Such a reduction, however, could be expected over the course of a year, to add perhaps 200,000 people to the ranks of the unemployed. A larger budget cut might reduce the rate of inflation by another fraction, but it could well tip the scales of an already precarious economic situation into a new recession and swell the unemployment rolls by a much greater number.
I love it when history is relevant to current events. I’m not going to be a political or economic historian, most likely, but finding things like this—or, for example, turning on C-SPAN or MSNBC and seeing the regulation debates of the ’70s and ’80s echoed in today’s discussions about the auto industry or the banks—makes me feel like I’m doing something valuable by intending to study history.