Former Federal Reserve chairman Arthur F. Burns warned Congress yesterday the nation no longer could afford a "gradualist" anti-inflation policy.
Speaking before President Carter outlined his latest anti-inflation plan, Burns told the Senate Banking Committee "it has become essential to rout inflationary psychology."
Barry Bosworth, former director of the Council of Wage and Price Stability, told the same committee the nation could expect a 20 percent inflation rate for several months to come and an underlying rate of 10 percent or more for many years to come.
Bosworth also challenged the potential success of a gradualist anti-inflation program.
Burns, accusing Carter of giving only "feeble lip service" to fiscal restraint with his budget for fiscal 1981, called for a balanced budget.
Any effective anti-inflation program,Burns said, should include an end to federal deficits, restrictive monetary policies that are binding and a reduction of business taxes.
Carter, in his newest anti-inflation program, proposed cutting the 1981 budget by $13 billion to bring it into balance along with tighter monetary controls and the promise of business taxrelief in future years in exchange for productivity gains.
Burns stressed the need to "shake theconviction" of Americans that inflation will continue for a long time."Once people are persuaded that inflation has become the national way oflife, they are apt to spend more and save less," Burns said.
More ominously, he said, "growing numbers are entering into longer term contractual commitments with respect to interest rates, wages, rents or prices that can prove disastrous once inflation is curbed."