Federal Reserve Board Chairman G. William Miller yesterday forecast a deeper and longer recession than the Carter administration is predicting, but warned against either cutting taxes or easing money and credit policies.
Miller also called for immediate decontrol of crude oil prices, rather than the gradual lifting of controls ordered by President Carter. He conceded the move would spur inflation, but said the surge would last only a few months.
Miller's comments, delivered at a hearing of the House Banking Committee, added yet another voice in government against any quick stimulative action. Both the White House and Congressional Budget Office have issued similar warnings.
Miller also announced that despite its recession forecast, the board would retain the same targets for money supply growth for 1980 as it set in 1979, rejecting pleas by liberals that it ease its tight-money stance.
The Fed chief was even more emphatic in opposing a tax cut. He said the economy could recover on its own next year "without" tax cuts. "We should not be panicked," he admonished, "into precipitous action."
Miller's testimony came afer, separately, two nongovernment economists told the House Budget Committee that Congress should slash taxes by between $20 billion and $30 billion next year to help offset the recession.
The two, Walter W Heller, former Kennedy administration presidential adviser, and Leif H Olsen, chief economist for Citibank, asserted the reductions could be designed to minimize their impact in spurring inflation.
Heller called for a major reduction in Social Security payroll taxes, which would also cut labor costs for employers, and a series of tax cuts for business aimed at encouraging new investment.
Republicans and Liberals on the panel appeared enthused about the plan. However, Rep Robert N. Giaimo (D-Conn), the Budget Committee chairman took a wait-and-see attitude, arguing the decision should be made in January.
Miller's comments were designed in part to help bolster the dollar, which has been declining on the foreign exchange markets. The Fed chairman several times mentioned the dollar in urging Congreess not to "relent" against inflation.
Miller's forecast was for a "moderate" recession this year and into 1980, with "real" output declining in both years by between 0.5 percent and 2 percent and the jobless rate ultimately soaring to as high as 8.25 percent.
Miller's endorsement of immediate decontrol of oil prices was described by him as "my preference" over the various alternatives that were available. Carter has rejected immediate decontrol both of oil prices and gasoline prices.
He also predicted that inflation would surge to between 9.5 percent and 11 percent this year, easing only for a "moderate" recession this year and into 1980, with "real" output declining in both years by between 0.5 percent and 2 percent and the jobless rate ultimately soaring to as high as 8.25 percent.
He also predicted that inflation would surge to between 9.5 percent and 11 percent this year, easing only slightly to between 8.5 percent and 10.5 percent in 1980. The rates all are measured from fourth quarter to fourth quarter.
By comparison, the White House forecast last week that the economy would decline by 0.5 percent this year, but predicted a recovery in 1980 that would produce a resumption in growth of about 2 percent.
It also forecast a peak unemployment rate of 6.9 percent, not 8.25 percent, as Miller did, and predicted inflation rates for this year and next of 9.8 percent and 8.1 percent, based on the GNP price index.
Miller also predicted the recession will last for "the next few quarters." The White Hose forecast showed the actual decline in output continuing only for two quarters. CBO predicted a three-quarter decline.
The Fed's continued moderate targets for monetary growth would set the ranges for M-1, the narrowly defined money supply, to between 1.5 percent and 4.5 percent. The range for M-2, a broader measure, would be 5 percent to 8 percent.
The testimony came as a group of non-government economists invited to the White House for consultations with top officials painted a somewhat grimmer picture than the administration, but varied in their policy recommendations.
Their propsals ranged from holding firm to a steady-as-you-go course to asking Congress for a sizable tax cut. The White House officially has taken the position that the government should stick to its present course.
Giaimo's comments yesterday appeared to indicate that the Budget Committee will not recommend making room for a tax cut when it drafts its revised budget resolution for Congress later this month. CAPTION: Picture, Federal Reserve Board Chairman G. William Miller before the House Banking Committeeyesterday. By James K.W. Atherton - The Washington Post