Warning that the nation is "heading into a recession," the chairman and the ranking Republican of the joint Economic Committee joined forces yesterday to call for a minimum $20 billion tax cut in 1980 to give the economy a boost.
Sen. Lloyd Bentsen (D-Texas), the chairman, and Rep. Clarence Brown (R-Ohio) said that about half the cut should go to individuals to offset the effect of inflation pushing them into higher income tax brackets, and the other half to business to encourage added investment.
Meanwhile, a copy of a Senate Budget Committee memo obtained by the Washington Post indicated that a June 8 tentative forecast by the Congressional Budget Office predicted a recession beginning in the third quarter of this year, pushing unemployment to an average of 7.2 percent in 1980.
CBO had revised downward an earlier version of the forecast after a meeting June 4 with a group of outside consultants, some of whom were substantially more pessimistic about the economic outlook than CBO had been, the memo said.
Robert Reischuer, deputy director of CBO, declined comment on the memo and on the details of the tentative forecast. "We have done close to half a dozen different runs of the forecast," he explained, "and anything written on June 8 is completely out of date."
CBO's final version of its mid-year forecast was completed last Wednesday and has been sent informally to House and Senate budget committee staffs to allow them to begin work on re-estimating outlays and revenues. It will be released formally in two weeks.
On June 11, Alice Rivlin, director of CBO, complained that a Washington Post story the day before had erred, among other things, in saying that a version of the forecast had predicted a peak in unemployment of 7.5 percent next year. The final version of the forecast could include a number close to that level, one Capitol Hill economist speculated yesterday.
Bentsen, on the other hand, declared at yesterday's press conference, "Some economist - and these aren't the most pessimistic ones - are forecasting that two million more people will lose their jobs, bringing total unemployment up to eight million." That would mena an unemployment rate close to 8 percent, and perhaps more.
The chairman of the Senate and House tax writing committees, Sen. Russell Long (D-La.) and Rep. Al Ul-Iman (D-Ore.), have been saying that Congress will opt for balancing the budget in 1980 instead of cutting taxes.
Bentsen brushed that assessment aside, saying, "When you see a recession, you will see the mood change very quickly to a tax cut to get the economy moving again."
But both Bentsen and Brown stressed that they did not want a tax cut designed to spur consumer spending. Such cuts in the past have led to a "boom and bust" cycle that must broken.
The two men said that tax cuts designed to encourage saving, such as through a tax credit on savings accounts, and faster write-offs of business investments, would ultimately improve the nation's productivity and help break that cylce. CAPTION: Picture, U.S. Rep. Clarence Brown (left) and Sen. Lloyd Bentson: warning that the nation is "heading into a recession." By Larry Morris-The Washington Post