The resulting compromise has been appropriately described as “go-stop” policy. First, over-expansion led to inflation, the “go” phase. Then, periodically, when inflation became bad enough, the Fed would tighten policy (the “stop” phase), only to loosen again when the resulting slowdown in the economy began to manifest itself.
Moreover, as you all know, the temporary payroll tax cut has now expired, and many households have seen their disposable incomes reduced for this reason as well. Spending in the business sector recently has increased only modestly, perhaps due in part to the effect of these recent tax changes on consumers.