Title: Inflation in the 60's
Headings: Inflation in the 60's
Inflation in the 60's
Content: In July of 1965, President Johnson committed American forces to Vietnam. Wars generally bring about inflation, but the unrelieved financial demands of the war became a serious burden on the economy. The Defense Department estimated U.S. expenditures in support of obligations in Southeast Asia as $103 million in 1965, $5.8 billion in 1966, $20.1 billion in 1967, $26.5 billion in 1968, and $28.8 billion in 1969. Johnson did not want to consider it an all-out war, so he was reluctant to request that Congress pass a tax to finance the war. For two years, he held back, thus blowing a growing hole in the federal budget. Johnson's desire to maintain the Great Society domestic programs while fighting the war in Vietnam contributed further to federal debt. The production requirements which the war effort necessitated also pushed the economy beyond the careful constraints the Council of Economic Advisors had suggested to promote non-inflationary growth. By 1966, the government wage and price controls were breaking down. This, combined with rising interest rates signaled the end of non-taxationary solutions to control inflation. After an economically painful 1966, Johnson was forced to overcome his resistance to taxes.