ECONOMIC

the first half of 1976, when expenditures were lower than anticipated whilereceipts remained close to target. Had Federal expenditures followed theprojected pattern, the level of GNP would have been higher and the economicslowdown following the spring of 1976 would have been less severe.The overestimate or shortfall in Federal spending in 1976 was small relativeto the size of the budget and was typical of recent years (Table 14).These errors in estimating spending suggest that the ability to forecast Governmentexpenditures precisely is limited, and that the textbook notion ofa truly deterministic level of Government spending is too simple. To theextent that a regular pattern exists in the difference between actual andpredicted levels of Federal spending, appropriate adjustments can be madewhen predicted expenditures are incorporated into economic forecasts. Theshortfall last year is an important reminder of the difficulties in attemptingto fine tune the economy with fiscal policy. This experience suggests that it ishard to measure the precise magnitude of the policy instruments as well asto assess their economic effects.TABLE 14.—Comparison of projected and actual Federal expenditures, nationalincome and product accounts, fiscal years 1970-76[Billions of dollars, except as noted]Actual less projectionFiscal yearProjection 1ActualAmountPercent ofactual197019711972...1973197419751976 . . .196.0212.4238.2259.7286.4324.4378.7195.6212.7232.9256.2278.9329.5373.0-0.4.3-5.3-3.5-7.55.1-5.7-0.2-2.3-1.4-2.71.5-1.51 Projections made in the Budget of the United States Government published in January of the current fiscal year and, exceptfor fiscal year 1976, adjusted for revisions by applying projected percent changes to revised data.Sources: Department of Commerce (Bureau of Economic Analysis), Office of Management and Budget, and Council ofEconomic Advisers.FEDERAL EXPENDITURES AND THE SHORTFALLThe 8.7 percent increase in total Federal expenditures in 1976* was a returnto a more typical rate of growth after the exceptionally large increasesin 1974 and 1975 caused by the high rates of unemployment and inflation inthose years (Table 15). The deceleration in 1976 was due mainly to muchsmaller increases in transfer payments to individuals and grants-in-aid toState and local governments.*Unless otherwise noted, reference is to calendar years and to the Federal sectorin the national income and product accounts (NIPA). The Congressional Budget andImpoundment Control Act of 1974 changed the fiscal year from July 1-June 30 toOctober 1-September 30, beginning with fiscal 1977. The change necessitated a3-month "transition-quarter" from July 1, 1976 to September 30, 1976.70