Lawrence R. Klein, Jimmy Carter's chief economist during the Presidential election campaign, said yesterday the ecomony needs a stimulus of about $15 billion to accelerate growth here and abroad.
Klein, professor of economics at the University of Pennsylvania and President of the American Economic Association, addressed the Washington Post's annual business outlook luncheon.
He said he strongly disagreed with those who feel that an improvement in the economic indicators recently eliminates the need for an expansionary program by the Carter Administration.
The President-elect and his cabinet aides dealing with the economy met in Plains, Ga., yesterday to put the finishing touches on the economic package. Carter staffers indicated that they agreed with Klein that some staffers indicated that they agreed with Klein that some stimulus is necessary, but that there is still debate on the total figure and the various components.
Klein said, "We'll never get recovery untless we put, some quarters back-to-back of 6 per cent (real economic) growth." Since the present pace is only about 4 per cent, "it is compelling" that Carter introduce a program intended to have a quick short-term impact, he said.
He favors temporary personal tax cuts amounting to $8 billion, a permanent $2 billion increase in the investment tax credit, and about $5 billion worth of spending programs divided between public works and public service jobs.
Klein said such a program would produce a growth rate of about 6 per cent "for two or three quarters in 1977, and that will look good to the rest of the world." He said other major industrial countries are waiting for the U.S. to take the leadership in expanding output and reducing unemployment.
He urged the Carter administration not to lose sight of the possibility that the business cycle might produce a recession in 1978-79, in its concentration on the more immediate problems of 1977.
Medium-term planning to deal with deep-seated structural unemployment problems, and the possibility of tight credit markets should be blended with plans for the short run, he suggested.
"If we don't do anything now (on medium-range policies), we might have a real negative growth, a real recession in 1978 or 1979," Klein said.
Klein was chairman of Carter's economic task force during the campaign. He chose to stay at the University of Pennsylvania to continue work on an econometric model of the inter-related world economy. But he will be at least an informal consultant to the Carter administration through the Council of Economic Advisers.
Washington Post deputy financial editor William H. Jones told the luncheon audience that the 1977 local business outlook is brighter than it has been for several years.
He said residential construction will continue to expand, retail sales should increase, unemployment should continue a gradual decline, but consumer prices may climb by 6 per cent or more.
Jones also noted the absence of any "genuine economic data gathering in the metropolitan area." The area business community he added, is "not really organized as a group that considers metropolitan-wide problems."