The director of the Congressional Budget Office said yesterday that the administration's new taxing and spending plan will stimulate economic growth and employment, but probably not by as much as the administration says it will.
Alice Rivlin told the Senate Budget Committee that the administration's forecasts of 4.8 per cent economic growth, 6 per cent inflation and 5.9 per cent unemployment in 1979 are all on the "optimistic end" of the budget office's forecasts.
President Carter has proposed a $500.2 billion budget for fiscal 1979, which starts Oct. 1, and a $25 billion tax cut. The 1979 budget is expected to be in deficit by $61 billion compared with the $62 billion revenue shortfall in the 1978 budget.
Carter has characterized the budget as tight, and data contained in Rivlin's prepared testimony showed that unemployment will be only slightly better as a result of the policies contained in Carter's first budget than if the policies in President Ford's final budget had been maintained.
The president has come under attack from many liberal Democrats who feel he has not kept his promise to cut defense spending and boost outlays for employment and training programs.
Rivlin also testified that the economy will need further stimulus in 1980 and 1981 - beyond the impact of the $25 billion tax cut - if growth is to be maintained and unemployment trimmed further.
Charles L. Shultze, chairman of the President's Council of Economic Advisers, said the administration recognizes it may need to put into effect further tax cuts or spending increases to maintain economic growth.
He said the administrationstill has not abandoned its goal of balancing the federal budget by 1981, but said that if demand growth in the private sector appears insufficient to achieve high employment, then the adminsistration would postpone balancing the budget in favor of taking further stimulative steps.
Rivlin, whose Congressional Budget Office supplies non-parisan economic analysis to the House and Senate budget committees, said under questioning that, nor the administration to achieve 4 percent unemployment and 4 percent inflation by 1963 and a balanced budget by 1981, ther will have to be unprecedented growth in the private sector.
It would be "well above anything we have experienced on a sustained basis," she told Sen. Henry Bellmon (R-Okla.), ranking minority member of the committee.
Schultze concurred that "very" strong economic growth would be required in the private sector if the administration is to balance the budget by 1981.
Schultze defended the $61 billion fiscal 1979 deficit and said that it would not add to inflation. If the administration had not cut taxes, the deficit could have been trimmed by $15 or $20 billion.
"But the price would have been a weaker economy, almost a million fewer jobs, a substantially higher unemployment rate and less growth of investment and industrial capacity," Schultze told the committee.
Treasury Secretary W. Michael Blumenthal and Office of Management and Budget Director James McIntyre defended the president's budget and tax proposals before the House Appropriations Committee.