The congressional budget committees yesterday were reported to be leaning toward acceptance of the Carter administration's economic forecast, which includes slow growth this year but no recession, in setting their respective budget targets for fiscal 1980.
Sources claim that if the committees used the Congressional Budget Office's prediction of a recession late this year and the resulting $41 billion deficit, it would cause such serious political headaches that they might be unable to get their budget resolutions approved.
Current economic indicators show little evidence that a recession will hit next fall or winter. Absent such evidence, say the experts, the committees would find it all but politically impossible to frame a resolution with a deficit larger than the $29 billion President Carter proposed.
"It's certainly easier for the committees to take the more opitmistic forecast," said CBO director Alice Rivlin
Rivlin, at a briefing on the CBO analyses of the Carter budget, added, "They could take the more optimistic forecast and resolve to rethink" the numbers later. A second budget resolution must be adopted in September. "More likely," she said, the committees might include "triggered employment programs" that would come into effect if unemployment rose.
Sen. Edmund Muskie (D-Maine), chairman of the Senate Budget Committee, has described the Carter $29 billion deficit as "a very achievable number." However, he has also said, "You don't have to have very much of a difference (in an economic forecast) to get substantial differences in budget impact."
In fact, CBO forecasts economic growth of about 1 percent for all of 1979, while the administration predicts 2.2 percent. Similarly, CBO expects inflation to run about 8 percent this year, with the Carter economists predicting 7.4 percent
Historically, the House committee has had more trouble getting its version of the first and second budget resolutions passed, primarily because of conservative opposition to large deficits. "If the deficit is too big," said one committee staffer, "you just can't get the votes to get it passed. The House committee has said in the past that it is not bound by CBO projections. I would not be surprised to see it follow the administration."
Meanwhile, Charles Schultze, chairman of the Council of Economic Advisers, defended the administration forecast before the Joint Economic Committee. Both Democratic and Republican members of the committee seemed unwilling to challenge the forecast, but had plenty of criticism for some of its implications.
Rep. Henry Reuss (D-Wis.) demanded to know, "Why are you sitting by and allowing the overall unemployment rate to go up from an inexcusable 5.8 percent to an outrageous 6.2 percent?" -- the rate forecast for the end of 1979.
Schultze responded that it was necessary to seek slower economic growth in 1979 to avoid added inflation from an overheated economy.
The CEA chairman acknowledged that administration policy did not fully avoid the danger of a recession. "Of course I see a danger in some sense," Schultze said. " It's not as easy as rolling off a log to move from a recovery to long-term sustainable economic growth."
The CBO yesterday also issued new five-year budget projections that the budget is unlikely to be balanced before 1983 at the earliest. Attempts to balance it more quickly, said the CBO analysis, would mean slower economic growth and continued high unemployment.