The U.S. economy already has experienced the worst of a "fairly moderate recession" during the current calendar quarter, Treasury Secretary G. William Miller told Congress yesterday.
In testimony before the Joint Economic Committee, he again rejected, "at this time," a call by Sen. Lloyd Bentsen (D-Tex.) for a tax cut to stimulate business investment.
"It is far too soon to be talking of tax cuts," Miller said, asserting that the right policy is to keep up the fight for a balanced budget "and not be diverted from our objective of combatting inflation."
Except for saying the current quarter's decline in real gross national production will be "sharp," Miller didn't try to measure the present slump. Many private forecasters, however, have stimated that second-quarter GNP will show a slide of 7.5 percent or more.
Miller didn't change the administration's official forecast for a 7.25 percent unemployment rate by the fourth quarter of 1980, although the new claims data indicate that the May jobless rate will be well over that.
A forecast yesterday by Lawrence Chierine of Chase Econometrics Associates Inc. placed the unemployment rate in excess of 8 percent by late summer, with only a gradual decline coming in 1981 and 1982.
Miller's prescription for a steady-as-you-go, unchanged economic policy was blasted by Sen. Jacob Javits (R-N.Y.) as "dreary and tired, like a broken record. It's a pedesterian approach."
But President Carter's chief economic policymaker and spokesman contended that a policy of restimulating the economy only would make things worse. "Any premature relaxation of basic policies of restraint could whipshaw the economy and financial markets," he declared.
And with an oblique reference to pressures from Europe and Japan to maintain a steadfast and austere policy. Miller said that it is "widely felt" abroad "that we stand at a crossroads so far as inflation is concerned."
Miller said that the government's first tactical priority before considering tax changes is to reduce the government's borrowing in the capital markets from last year's 26 percent level "to less than 10 percent."
That would ease pressure on financial markets, and help keep interest rates on a downward course, Miller said. But Javits retorted that "I don't have any faith in the 'crowding out' theory -- the nation is awash in money."
He accused Miller and the administration of failing to take into account "the enormous price" being paid for its approach toward rising unemployment. The New York senator brusquely accused the administration of orchestrating "the first planned recession in history."
Miller vigorously denied that the administration had sought the present recession as a deliberate policy. He said the hope was to achieve "slow growth," but external events, including the oil cartel's 100 percent price rise in 1979, "had triggered recession."
Miller said it isn't possible on the basis of current statistics to guess how deep the recession will be. But he said that this decline is likely to be less severe than the one in 1974-75, when real GNP dropped by about 5.5 percent.
Bentsen, on the other hand, predicted that "we are close to a repeat of 1974-75, and we haven't done what needs to be done to get the economy moving again." Industrial investment needs the stimulus of some new tax break, the JEC chairman said.