Congress should push for spending cuts of up to $30 billion in fiscal 1982 -- an amount equal to roughly half the projected $55 billion to $60 billion deficit -- House Budget Committee Chairman James Jones (D-Okla.) said yesterday.
Jones called for the budget cuts in an interview with Dow Jones News Service as Federal Reserve Chairman Paul A. Volcker repeated his warning that federal spending must be curbed if interest rates and inflation are to come down.
Speaking to farmers in New Orleans, Volcker said that although continued monetary restraint is essential to fight inflation, "reduced growth in government spending can have a major payoff." The new Reagan administration will come into office next week committed to cutting back spending and reducing taxes.
Jones said that with so much of the 1981 fiscal year over, it is too late to expect "meaningful cuts" in the budget for this year which President Carter will submit to Congress on Thursday. Reagan's economic team, under the director-designate of the Office of Management and Budget, David Stockman, is studying ways of cutting the budget in later years so as to leave room for tax cuts, and to reduce the federal deficit in coming years. While some spending will be pared immediately, Stockman has emphasized the importance of preparing for cuts in the future and the difficulty of making significant cuts in 1981.
Although the economy is now believed to be turning down under the impact of higher interest rates, figures released yesterday by the Federal Reserve showed consumer credit still advancing in November of last year, although there was a drop in the value of new credit extended during the month.
Total outstanding credit rose in November by a seasonally adjusted $839 million, or 3 percent annual rate, the Fed reported. It stood just 0.2 percent higher than a year earlier. New credit fell 5 percent to an adjusted $25.99 billion from $27.37 billion the previous month.
The overall amount of credit rose largely because of a 5.7 percent drop in repayments and other liquidations of debt to $25.15 billion. Credit outstanding on autos rose an adjusted $245 million in the month after increasing $201 million in October.
Volcker held out the prospect of continued strong inflation and high interest rates, although he said he realizes how much these hurt farmers. He repeated his theme that there is now a great opportunity for the nation to improve its economic health and bring down inflation, and pointed out that farmers also should not press their congressmen for new, expensive programs but should support budget control.
"Our basic objective is to increase productivity, to utilize efficiently more of our human resources and to resume economic growth," he said. But the way toward this goal will not be painless, he admitted.