President Carter's chief economist conceded yesterday the economic outlook was clouded for late 1978 and beyond, but cautioned that policymakers should wait for more data before deciding whether to propose a new tax cut.
Charles L. Schultze, chairman of the Council of Economic Advisers, admitted in a speech that "as one looks further ahead toward the latter hald of 1978, the outlook necessarily becomes more uncertain."
But Schultze warned the administration should be cautious in deciding on any departure from its long-range economic politics because it's harder to get back on tracks once they have erred on the liberal side.
If policymakers find the economy needs more stimulus, Schultze said, "fiscal actions can be taken promptly. But if we plan now on . . . tax and spending measures . . . and are proved wrong, cutting back . . . would (be) vastly more difficult."
Schultze's comments marked the first note of caution by top Carter policymakers in the wake of a Treasury memo reported two weeks ago suggesting a tax cut might be needed next year if the economy turns sour.
The pressure for such a move was heightened by the disclosure last week of a new White House forecast predicting the economy would slow to a sluggish 3.5 per cent growth rate by late 1978 if no new actions were taken.
Although Schultze did not formally confirm that figure yesterday, he implied that despite initial calculations the administration ought to take its time in deciding on any new stimulus, to make sure it is needed.
The Treasury's plan was to split up the President's upcoming tax-revision package if the economy turns sluggish, and enact tax cuts in 1978 that otherwise would have been scheduled for 1979.
Although the tax-revision package is expected to be unveiled this month. policymakers figure they have until late December, when the fiscal 1960 budget is decided, to make up their minds on the issue.
Schultze's point yesterday was the strategists will have more late-breaking economic data to work with by then, and should wait until year-end to decide finally on the tax-cut question.
The Carter economic adviser spent much of the rest of his talks trying to bolster confidence in the economic outlook for the next two or three quarters, insisting that the recovery looks robust at least through mid-1978.
"The present recovery is likely to continue for some time," he told his audience of business economists.
"Ample resources are available to permit further expansion, and the recovery shows few if any signs of economic aging."
At the same time. Schultze repeated his call of last week for some further easing in monetary policy, arguing that the turnover of money in the economy may be slowing down, requiring a faster growth in money supply to maintain the same pace in the recovery.
Schultze made his remarks in an address delivered before a meeting of the National Association of Business Economists in Philadelphia. A copy of his speech was made available here by his office.