Leading economists said today the $25 billion tax cut President Carter plans to propose to Congress next year will not be big enough to keep the economy growing at a healthy pace and creating jobs into the 1980s.
That was the near-unanimous conclusion of a panel compared of many prominent forecasters, who urged the President to take further steps, such as boosting federal spending or increasing tax cuts, to stimulate the economy.
Former Carter campaign adviser and University of Pennsylvania economist Lawrence Klein and the chairman of President Ford's Council of Economic Advisers, Alan Greenspan, agreed that the proposed tax cut will not be big enough to end of 1980. Last week, former President Ford called for a tax cut that would total $68 billion by 1981.
Most of the economists on the panel were optomistic about 1978, agreeing that it would be similar economically at least to 1977. Production of goods and services (the so-called real gross national product) will grow between 4.5 per cent and 5 per cent, unemployment will continue to decline slowly and inflation will remain stubbornly high, perhaps beginning to accelerate by the end of the year, they predicted.
The panel was sponsored by the American Economic Association, which is holding its three-day annual meeting here.
Only Michael K. Evans, vice president of Chase Econometric Associates, was pessimistic about 1978.
Evans said that a substantial decline in new car sales as well as a sharp fall off in new home construction next year will hold economic growth to between 2 per cent and 3 per cent.
Economists think that the economy must grow about 4 per cent a year merely to create enough jobs to keep unemployment from rising. To make a dent in the unemployment rate (which has fallen from 8 per cent in November in 1976 to 6.9 per cent last month), the economy must grow faster than 4 per cent.
Nearly all the forecasters worried that by 1980 higher Social Security taxes and new energy taxes will more than offset the tax cut Carter is expected to send to Congress next year.
Evans proposed a $60 billion tax cut over the next three years that would lower all individual tax rates by 27 per cent and trim the corporate tax rate from 48 per cent to 40 per cent.
However, Greenspan noted, the President's proposals will go to Congress in an election year, and Congress can be expected to give the public a bigger tax cut that that proposed by Carter.
The former Ford economic adviser said that despite a slowdown in new car sales and housing - which nearly all forecasters expect - there will be enough growth in other sectors of the economy to continue a healthy expansion throughout 1978. Greenspan said that he is "bullish" on next year.
Harvard professor Otto Eckstein, who also is president of Data Resources, Inc., noted that economic expansion "Don't stop without a reason." and said he sees nothing that threatens to overturn the economy in 1978 or 1979. However, he cautioned, there is a possibility that the recovery will simply wither away as demand for goods and services dies off.
It is that possibility, which some forecasters think is a probability in 1979 that is behind most of the calls for economical stimulus beyond the $25 billion tax cut.