The Carter administration's top economist yesterday made a conciliatory bid for support to a New York business audience in a speech as notable for what he didn't say as what he did say.
Stressing the need for "business-oriented tax reductions," Economic Council Chairman Charles L. Schultze said that one main Carter objective "is to provide a tax and regulatory climate that improves business profitability and encourages capital formation."
But he never mentioned the words "tax reform" or specifics such as an end to special treatment of capital gains - administration proposals that have agiated some elements in the business world.
And he pointedly ommitted references he had been making in a series of recent speeches to the need for a faster growth in the money supply than Federal Reserve Board Chairman Arthur F. Burns had seemed willing to accept.
There was, in fact, no reference at all to monetary policy, which Burns has claimed to be the special responsibility of the Federal Reserve.
Two weeks ago, a White House statement criticizing Fed policy as a threat to recovery -drawn from earlier Schultze speeches - was posted on the press room bulletin board, and brought a sharp rejoinder in a speech from Burns.
Schultze spoke yesterday at the annual conference of Robert Morris AAsociates, a group of bank loan officers.
Schultze said "the state of the economy . . . is good," and prospects for a continued and healthy expansion are bright. But he warned that measures for short-run stimulus had to be blended with longer-run objectives.
The new encouragement to business was only one of four major administration objectives Schultze spelled out. The other three are faster economic growth, eventual budgetary balance, and timing programs to avoid a sense of stop and go in the economy.
Schultze said the administration approves a steady reduction in personal taxes when the average tax take exceeds 11 per cent of personal income. he estimated that without reductions, taxes in a high-employment economy in 1981 would reach 13 per cent.
This gradually higher tax bite is the result of real income increasing as the economy grows, and inflation pushing taxpayers into higher brackets.
One of the reasons Schultze gave for stressing the need to reduce business taxes and to stimulate business investment is the high "risk premium" attached to investment decisions because of inflation.
Thus, he said, "investment in long-lived construction and other major projects" has lagged, while investment in short-term equipment has boomed. Burns made a similar point in almost identical language in a speech Oct. 26 that criticized the administration.
"The fear that inflation will not be effectively controlled is a key reason for the high risk premiums that businessmen nowadays typically assign to major Investment undertakings." Burns said.
Schultze dealt with the problem of inflation only in a passing phrase, acknowledging that ways must be found to reduce inflationary presures.
In a separate session with Washington Post editors and reporters. Secretary of Commerce Juanita M. Kreps said that although some progress had been made in bringing inflation down, the longer-term outlook is "very glommy."
Kreps said that the economy would need a tax cut next year, because after mid-1978 "some of the stimulus we have injected will be played out by then, and I don't see any source of new spending that would push us back up, unless we have a tax cut or something of the sort."
She suggested the adminisration would be "very sensitive" to performance of the economy in the final quarter of 1977 and the first of 1978 before making final decisions on new economic stimulants.