Alan Greenspan, chief economist for the Ford administration, yesterday forecast a return to double-digit inflation unless President Carter initiates drastic cuts in the federal budget in the next two years.
"I'm very concerned about a resignation of inflationary forces in a fundamental way, late in 1979 and 1980," Greenspan said on "Meet The Press" (NBC, WRC). "The type of inflation I'm envisioning in that period is clearly a function of federal deficit spending and the expansionary monetary policies required to finance it."
Chairman of the Council of Economic Advisers under President Ford, Greenspan said he foresees a slight decline in the rate of inflation from 7 percent to 6 percent later this year, then a rekindling of inflationary forces starting next year that could drive inflation as high as 8 percent next year.
"And in 1980, according to current plans, Greenspan said, "to the 10 percent level and perhaps even higher."
Greenspan said that if inflation rises to that rate by 1980 it would carry with it the threat of an economic recession. In such a case, he said, prices would move up rapidly in 1980 an "we may see a real recession in the latter half of 1980 and into 1981."
Greenspan, now a private economic consultant, tied the recent declines in the dollar's strength overseas to higher domestic prices. He said foreign investors sold dollars on the exchange markets because they are forecasting a continued rise in inflation for this country.
"The huge block of dollars that foreigners are trying to get rid of is basically a vote of no confidence in the inflation outlook in the U.S.," Greenspan said. "They're essentially saying that they have very little confidence in the purchasing power of the dollar.
Greenspan gave low marks to President Carter's economic team, which he called "puzzling" because Carter's individual advisers "are very competent people who are skilled at what they're doing." Greenspan blamed the president for what he called a "poor" economic performance.
"I think perhaps," Greenspan said, "the president may not be communicating to his advisers his views . . . on precisely where he stands on all issues. The evidences is in the seeming lack of coherence in the policies we see."