President-elect Jimmy Carter's nominee for chief economic adviser, Charles E. Schultze, revealed yesterday that the incoming administration would propose "an effective and voluntary" anti-inflation program soon after taking office.
In his confirmation hearing for the post of chairman of the Council of Economic Advisers, Schultze appeared to back away from Carter's earlier interest in numerical wage-price guidelines.
Schultze instead said there is a need to develop a "policy which would hopefully provide kind of guiding principles" to moderate inflation.
The anti-inflation goal, Schultze said, should be to reduce this year's inflation below last year's rate, and so on. He refused to specify a goal, saying "it's the trend that's important."
Although Schultze said he was willing to change his mind later on, he said his initial reaction is to oppose pre-notification by industry and labor of planned wage or price increases.
He said that if the Council on Wage and Price Stability (CWPS) and its staff are operating "well", pre-notification may not be necessary.CWPS is the government's existing price-monitoring agency.It has few formal powers.
In a briefing at Plains, Ga., on July 18, after consultations with business and labor, Carter suggested a pre-notification period of 30 to 90 days, and a 6 per cent voluntary price guideline.
Just after the election, in an effort to assuage business concern, Carter dropped his campaign demand for stand-by wage and price controls.
In a wide-ranging session that lasted almost three hours, Schultze defended Carter's two-year economic stimulus package as the right blend of temporary and permanent measures to speed a return to full employment.
He resisted defining full employment, but under persistent questioning by Sen. Edwin Brooke (R-Mass.) finally said "I would embrace (a target) in the range of 4 per cent (unemployment.)"
Schultze, who said he expected "to share the burden" of making major economic policy statements with Treasury Secretary'designate W. Michael Blumenthal, predicted that the unemployment rate - with the help of the Carter package - could fall as law as 6.5 per cent by the end of this year, "and will move towards and pefully through 6 per cent" by the end of 1978.
But he said it was unlikely that unemployment could be pushed below 5 to 5.5 per cent "by normal fiscal and monetary measures." Therefore, the Carter administration intends to press immediately "by every means possible, but without over-promising" to cut the rate below 5 per cent by a direct attack on unemployment, through training and other programs.
He refused a direct endorsement of a new version of the Humphey-Hawkins "full employment" bill, which states a 4 per cent goal instead of 3 per cent, as was the case in an earlier version.
Schultze, whose earlier critical testimony while still a Brookings Institution fellow helped kill the Humphrey-Hawkins bill in tthe last session of Congress, said he hadn't seen the new version, but thought it sounded like a change in the right direction.
He told committee chairman William Proxmire (D. Wisc.) that writing a 4 per cent unemployment goal into law "won't hurt, but I'm not sure how much you gain by it." SCHULTZE, From D10>
He brushed aside criticism of the Carter package as inadequate, saying it would make a significant difference in the tune of the economy. Small signs of the improvement may be seen as early as this spring, he predicted.
"The kind of recoveru we hope for," he said, "makes it perfectly feasibel and proper, barring unforeseen circumstances, to plan for a balanced budget in a high level economy in 1980-81 and if needed, a possible surplus."
He made a special point of saying that a critical element in the success of the program would be the willingness of the Federal Reserve System to accomodate the expansion with adequate growth of the money supply.
"The Federal Reserve ought to accept the explicit targets which are involved in Congressional action on the President-elect's proposals," Schultze said.
He cited testimony by Burns last year ot suggest that the Fed. Chairman in principle agrees with this obligation. He said he had every hope that Burns - who will be brought into the economic-policy consultation process will be co-operative.
Schultze also stressed in several ways that the administration would strive for an integration of foreign with domestic economic policy. He anticipates that one ofthe other two CEA members will be an international expert.