The Carter administration's top economic adviser yesterday sought to deemphasize the President's goal of a balanced budget in fiscal 1981, and abandoned outright the target of a 4 per cent inflation rate by the end of 1979.
Charles L. Schultze, chairman of the Council of Economic Advisers, said the administration's planning strategy "is not based on putting balanced budgets ahead of everything else."
He expressed the hope that the budget could be balanced in fiscal 1981, but stressed even more the need to maintain a "high employment" economy. If the private economy were to weaken, Schultze said, the right course would be additional tax-cutting programs and more federal spending to create jobs.
The latter course was precisely what Labor Secretary Ray Marshall proposed yesterday for the weakest sector of the economy.
In a speech to the National Alliance of Businessmen, Marshall recommended tapping an estimated $15 billion shortfall in government spending this year to finance a major expansion of federally financed jobs to help reduce unemployment, especially among young black people.
Marshall suggested expanding public service jobs from 725.000 to 1.4 million by 1980, a 50 per cent increase in the recently enacted youth employment program and a prompt start on testing inner-city job programs for the administration's proposed new welfare plan.
Aides to Marshall said he outlined some of these ideas in a memorandum that Carter requested earlier this month after release of statistics showing the unemployment rate among black teenagers to be 40.5 per cent. Carter has called that situation his "most important domestic issue right now."
Marshall told reporters he has not yet received any White House reaction to the ideas but plans to discuss them with Carter in about a week.
Marshall's plan focuses on using money that the government planned to spend, but did not spend during the current fiscal year. This shortfall amounts to about $15 billion of the early 1977 projection of $417 billion in federal spending for the year.
The spending slowdown has been a source of bafflement and concern for budget officials in both the Ford and Carter administrations.
A congressional budget aide said that, to the extent that the shortfall arises from money that isn't being spent as opposed to faulty estimates, a reallocation is technically feasible, although it may be politically difficult.
In his speech to the businessmen's group, a voluntary government-supported association devoted to increasing employment, Marshall said the economic outlook for the next 6 to 12 months is murky, but clearly indicates a need for "additional stimulus" to create more jobs for blacks and young people.
Schultze's shift yesterday, made in a speech here to the American Newspaper Publishers Association, dropped out any explicit commitment to a balanced budget in fiscal 1981 from a list of the administration's "broad objectives and policies."
In a telephone interview following the address, Schultze insisted that the administration policy is unchanged. Carter commitment to a balanced budget, reduction in unemployment to 5 per cent by fiscal 1981 and the simultaneous advancement of a number of social goals was the cornerstone of Democratic campaign strategy last year.
The feasibility of achieving all those targets has been widely challenged, notably in studies by the Congressional Budget Office and the Brookings Institution. The balanced budget target has also been severely criticized by Democratic liberals and spokesmen for blacks, who argue for greater attention to unemployment and to urban problems.
Schultze conceded, however, that the emphasis was changed, and changed deliberately. I read over my old speeches, and they emphasized a balanced budget too much I found the phrase 'balanced budget' on every page."
As he stated in his ANPA speech, the budgetary goal over the next four years is merely "to avoid inflationary deficits as the economy returns to high employment and prosperity."
Schultze conceded in the subsequent interview that his omission of a 4 per cent inflation target from his speech was significant, "because it is more difficult to get (down) to that." The goal he outlined was simply to prevent "a reacceleration of inflation, and beyond that to seek a reduction in the rate of inflation."
Carter set the 4 per cent target for the end of 1979 on April 15, when he announced a mild anti-inflation program, many parts of which are yet to be put into effect.
In yesterday's speech Schultze mentioned no new target, nor did he predict that the present 6.0 to 6.5 per cent rate of inflation - "far too high for comfort" - would abate.
Schultze was relatively opimistic about the short-term economic outlook despite some weak spots. For one, he pointed to the enormous U.S. trade deficit, running around a $25 billion rate, and said it had "damped" economic growth. But, as he has done before, he rejected the notion that there would be either a recession or substantially slower growth "in the year ahead."
For the longer term, Schultze was considerably less positive, warning that it "will not be an easy (task)" to achieve non-inflationary economic growth "over the next several years."
He ciled uncertainty and a lack of confidence among both business and consumers, still scarred by the severe recession of 1974-75. "Government has to wrestle with the paradox of an economy in which most of the underlying economic circumstances and basically favorable, while the major actors - businessmen, financial institutions, and consumers - still view the future with caution and skepticism," he declared.