Three prominent economic forecasters disagreed yesterday on whether the U.S. economy is likely to fall into a recession, in testimony before the House Budget Committee.
The three had been invited to help the committee decide whst economic assumptions to use in drafting this year's budget resolutions. The advice they gave was actually far closer to a consensus than their forecasts appeared.
One of the three. Lawrence Klein of Wharton Econometric Forecasting Associates, predicted a strong current quarter and then an extended period of slow growth -- but no recession.
Another, Otto Eckstein of Data Resources, Inc., said he expects a very mild recession in the second half of the year, partly as the result of an assumed auto workers strike. But after the hearing he said that he is becoming "more optimistic" and may have to revise his forecast later on.
The third forecaster, Michael Evans of Chase Economertrics, was gloomier. Evans thinks economic growth will be miniscule in the first part of the year, followed by a recession and then a recovery in 1980.
After all that, observed one member, Rep. William Frenzel (R-Minn.), "I'm all little confused."
All of the forecasts were, of course, compared to that on which the Carter administration based its budget, which for 1979 was quite close to that of Klein -- a strong first half year and a slowdown, but no recession, in the second half.
Evans said that of 50 forecasts of which he was aware, the administration's was higher than any other and that is has been "justified with logic I just don't believe."
On the other hand, Eckstein characterized the Carter projections as "optimistic but not foolish. We don't know there will be a recession," he said, adding that there is some evidence that a "soft landing" is possible.
Ecksteinhs outlook even including enough of a slump for it to be called a recession, leaves the economy about where the administration predicts it will be at the end of 1980; That happens because, after the recession, Eckstein sees faster growth rext year than dows the administration. Along the way, however, output would be about 1.4 percent lower, he said.
Klein's forecast, which is close this year, sees slower growth than the administration for 1980. Evans, with a recession this year and growth of 4.1 percent in 1980, ends up with a level of GNP at the end of 1980 that is actually higher than that predicted by Klein.
All this, confusing as it sounds, underscores the fact that the various forecasts show different paths for the economy over the next 24 months, but all the paths come out fairly close to the same point.
In fact, they come out almost within the margins of error -- plus or minus one percent -- which the forecasters normally assume.
All of them urged the committee to focus first on the $531.6 billion spending target set by Carter for 1980. Even if there is a mild recession, that should not be exceeded, they said. Trimming it by anywhere from $1 billion to (KEY OFF) billion would be better because of the psychological impact both here and abroad, they indicated.
Eckstein said holding that line, but using his forecast, would mean a budget deficit of about $43 billion instead of the $29 billion in the administration's budget. Klein and Evans both had 1980 deficits of about $60 billion in their forecasts, but Klein was assuming a $20 billion personal and corporate tax cut for 1980, while Evans a $10 billion cut.(KEYWORD)