U.S. Chamber of Commerce economist Jack Carlson said yesterday that President Carter's proposal to add $19.4 billion in new spending to the federal budget for fiscal 1973 provides initial evidence that it will be "virtually impossible" for Carter to balance the budget in a four-year term in office.
The added spending "is fairly significant . . . taken by itself it will be somewhat discouraging" because of a general expectation that higher spending levels will be maintained in future years and adding to a psychology of inflation. Carlson said in an interview.
Several other economists, businessmen and Wall Street analysts, joined Carlson in pointing to fears of renewed inflation as a major factor affecting investment decisions.
Carter's actual $459.4 billion budget message, sent to Capitol Hill yesterday, contained few surprises and the stock market took it in stride - which meant another bearish performance.
Volume on the New York Stock Exchange contracted to 17.7 million shares from 18.04 million last Friday and the Dow Jones average of 30 industrial blue-chip stocks fell 0.33 to 939.91.
McDonnell Douglas Corp., the St. Louis-based airplane manufacturer was a major loser on the Big Board yesterday, falling $1.875 a share to $21 in an apparent reaction to the Carter budget. As reported earlier, the adminstration has proposed a cutback in F15 production and McDonnell Douglas officials said that could mean a loss of jobs for up to 4,000 St. Louis area workers.
LTV Corp., another aerospace firm, warned that Carter defense spending cutbacks would have "a particularly serious effect" on Vought Corp., a subsidiary engaged in production of A-7E planes for the Navy and battlefield missiles for the Army - both of which have been proposed for termination. Jobs would be lost in Michigan and the Dallas-Ft. Worth areas, if the cutback is upheld. LTV chairman Paul Thayer said yesterday.
"There's a lot of gloomy an uneasy feeling that things get worse, that Carter and his staff don't know how to handle the job," said Reynolds Securities analyst Robert H. Stovall, who noted that the six consecutive weeks of a declining stock market in early 1977 add up to the longest such negative streak since 1973.
The "nagging fear" or "financial hypochondria" is that the Carter stimulus package and budget contain "just enough of a nudge to get us started on a path to high inflation . . . there is a feeling that by the time the stimulus is enacted; the economy will be playing catchup to the 'deep freeze' and won't need it," Stovall added.
Manown (Buck) Kisor, research chief at Paine Webber, Jackson & Curtis, Inc., said the weak stock market performance in early 1977 "took me by surprise. He said there is no doubt there will be a "bubble' in consumer prices - showing a higher rate of inflation during recent weeks, in the wake of bitter cold weather.
"The question is whether it becomes a balloon that last beyond the first quarter," he added.
As for the budget deficit proposed yesterday, Kisor said there is less concern about the actual numbers "than the worry over whether the administration will be able to keep Congress from making the proposed [economic] package even more stimulative."