The Carter administration is undergoing a major shift in its perception of the nation's economic problems - a belated recognition by top policymakers that the economy now appears headed toward a recession late this year and in 1980, with inflation likely to be far higher than officials had expected.
The change, which has evolved quietly over the past two or three weeks, has just begun to be acknowledged publicly by high economic officials - and even then only in terms of a "possible" impact on the economy from the recent oil cartel price increases.
And insiders say there's beginning to be some talk among policymakers about the possibility of at least a moderate-sized tax cut next year - both to offset the impact of oil price rises and to make up for the increased individual tax burdens caused by inflation pushing taxpayers into higher brackets.
Treasury Secretary W. Michael Blumenthal raised the possibility of recession last week, warning that another sharp increase in oil prices could push the economy over. And Council of Economic Advisers member Lyle Gramley has told reporters the White House no longer can "rule out" the chance of a slump.
But internal forecasts prepared by high-level administration economists show an even more pessimistic scenario, with the economy's growth rate slowing to well below 1 percent this year and inflation approaching - and perhaps topping - 10 percent. The low growth rate would imply at least a mild recession.
The shift in the officials' outlook isn't likely to become fully apparent immediately. The final forecast depends first on how much the oil cartel decides to raise prices this time around. And how candid the administration will be remains to be decided when the president returns from the Tokyo summit.
But strategists are expecting the administration to go at least part of the way toward a more realistic forecast when it publishes its mid-year budget review, the traditional vehicle by which the White House each year "readjusts" its January economic predictions.
The revised figures had been scheduled for early July, along with a mildly rejiggled economic forecast that simply took last January's predictions and cranked in the first quarter's more-bearish performance. Now, however, the forecast is being redrawn from scratch, and won't come until mid-month.
The change in the officials' outlook stems mainly from the sharper-than-expected rise in oil prices, which have soared 35 percent since the start of this year - and may rise further. But there's another factor: The economy generally has begun weakening substantially from its pace early this year.
To some outsiders, the shift by the administration may seem belated. Most private economists have been predicting a recession for months. And it's been evident since early spring that inflation would outpace the 7.4 percent rate forecast by the White House last January.
Nevertheless, to seasoned White House watchers, the switch is significant. Presidential advisers traditionally are the last ones in town to acknowledge the possibility of a recession. When they finally come around, it often presages a policy shift as well.
The turnaround is particularly dramatic in view of the administration's previous posture. Until last week, policymakers were asserting confidently that the economy would escape a recession. And only two months ago, Blumenthal was trying to persuade the Fed to tighten credit to combat suspected overheating.
The question of how to respond to the threat of recession may have to wait a few months. Policymakers are far too busy now trying to cope with the newly intensified gasoline shortage and inflation's increasing threat to the already weakened wage-price-guidelines program.
Most of the recent meetings of the top-level Economic Policy Group steering committee - the secretary of the Treasury, the chairman of the Council of Economic Advisers and the director of the Office of Management and Budget - have been spent on the energy problem.
The administration still is considering the possibility of imposing a gasoline-rationing program, and decisions over other major energy measures are still far from certain. Then come the guidelines questions. The meetings have been frequent and lengthy, but the problems are increasingly complex.
For this and other reasons, insiders say the tax-cut debate may not reach serious proportions until late summer or early fall - when the administration needs to begin thinking seriously about the issue if it wants to propose tax-cut legislation in its January 1980 budget.
Some of Carter's advisers still are holding firm against a tax cut in hopes that the economy can "ride out" the impact of higher oil prices - possibly until reductions in demand here "force" the oil-cartel to trim its prices some. There's also the high inflation to consider.
But others argue that that sort of thinking just borders on pipe-dreaming, and that the White House ultimately will find itself having to act next January. The oil-price rises alone are expected to sap some $30 billion to $35 billion from the economy. And the rest of the economy already has begun to slow.
Backing that up is a growing fear by some forecasters that even if the recession is mild, the recovery may not begin for months. The same absence of imbalances that may prevent the recession from deepening could deprive the economy of its traditional "snap-back." The slump could last into 1980.
A scenario of that sort, of course, would dash remaining hopes that the president will be able to balance the budget in fiscal 1981. The combined impact of a recession and a major tax cut would make a deficit almost certain, although both the administration - and Congress - continue to hold out that hope.
But more experienced strategists concede the White House may be drawn into a tax cut next January in the face of the coming presidential election. "Republicans will have a field day," one says. "They're already gathering material on how far living standards are down."
Just the same, no matter how the debate turns out, the significant thing right now is that the administration has shifted its own thinking about the economic outlook. Right or wrong, it's an important sort of turning point. What ultimatley results remains to be seen.