Treasury Secretary G. William Miller yesterday backed away from claims the recession in half over, saying the economic "distress," the "strain and dislocations . . . are still ahead of us."
"While the recession facing the nation is expected to be moderate," Miller told the Joint Economic Committee, "the current economic outlook remains volatile, particularly in light of the uncertainties about energy prices and availability."
On several occasions in recent weeks, Miller had assested, "The recession is half over." Yesterday he remarked, "It would not be proper to attribute to me the statement that the recession is half over."
With the recent credit-tightening moves by the Federal Reserve that have sent interest rates to record levels Miller went on to caution, "We must recognize . . . that the underlying factors have now changed somewhat and we cannot be as certain as previously about the depth and severity of the economic slowdown.
"However, there are few signs that we are facing a deep downturn of the 1975-75-type . . .," he added.
In a speech on the House floor yesterday, Minority Leader John Rhodes of Arizona praised the Fed's action -- as did Miller -- calling it the "first really effective step our government has taken to meet inflation head-on."
Rhodes was highly critical of both the administration and the Democratic congressional leadership from whom, he said, "there has been little but hand-wringing." He called for tax cuts to spur business investment and a balanced federal budget for 1981.
Meanwhile, reflecting some continued strength in the economy, industrial production rose 0.5 percent in September, the Federal Reserve Board reported yesterday.
The increase, largely the result of a rebound in automobile production, followed a 0.9 percent drop in August and gains of only 0.1 percent in both June and July, the board said. The September level was still below that of last March.
Automobile assemblies climbed from a 7.5-million annual rate in August to a 7.9-million rate in September, but remained far below the 8.9-million pace of the first half of 1979.
In line with the news on factory output, Miller said the economy has been showing "more strength than earlier anticipated," but that the nation is "still in a recessionary mode."
But even if the outlook is more uncertain in the wake of the Federal Reserve actions, as Miller conceded, he was emphatic that the administration would continue to regard inflation as the number one economic problem.
"I just cannot see this administration, which has shown the courage and determination to make controlling inflation its number one objective, suddenly backing off on that . . .," Miller declared. "I can see no way we would relent."
Should the recession turn out to be much more severe than now expected, Miller said, the administration "will be prepared . . . We will look at alternative policies, but with caution."
Miller stressed that the administration will stick to its guns unless a severe recession does, in fact, develop. "We will act upon facts and realities, not hopes and myths," he said.
"We are geared up to move quickly," the Treasury secretary assured the committee members, "so why move prematurely?" To do so, he said would put the nation "back in the inflation soup."
We will move forcefully, but only when we are sure it is the right medicine," Miller said.
The right medicine to him would be carefully "targeted" programs designed to help those parts of the country most affected by a recession. For instance, Miller urged that the House approve legislation already passed by the senate that would provide a program of stand-by countercyclical aid to state and local governments.
That program "would ensure that countercyclical funds go only to areas with substantial amounts of unemployed human and physical capital, and thus are less likely to fuel inflatin," he said.
Money would be available to state and local governments once the national unemployment rate reached at least 6.5 percent for a full quarter, but only if the rate in a state or locality was at least 6 percent. Under a formula, $125 million would be available each quarter plus an additional $30 million for each one-tenth of one percent by which the national unemployment rate exceeds 6.5 percent.
John Zamzow, a vice president of Chase Econometrics, told that JEC that, given Chase's forecast of a recession and relatively slow recovery, the Senate bill would lead to $1.9 billion in countercyclical aid during 1980 and almost as much in 1981 and 1982.
Miller and Zamzow both testified that different regions would fare very differently in coming quarters.
"Regions which are heavily dependent upon manufacturing activity as a source of income and employment are generally more severely impacted by national recessions," Miller said.
"Regions that have been experiencing rapid increases in economic growth due to increased captial investment, in-migration of labor, favorable climate, relatively cheap resources, or any number of other factors may be less severely affected by national economic recession . . .
"Regions heavily engaged in agriculture are not usually affected by recession to the same degree as regions heavily dependent upon industry," Miller continued.