Interest rates will stay on a high plateau for "as far as the eye can see," Walter Heller said yesterday. The former economic adviser to Presidents Kennedy and Johnson told a congressional panel that there is room for some easing of monetary policy now, although this could not bring rates down much in the long run.
But Walter Wriston, chairman of Citicorp, the nation's second-largest bank holding company, said that he expects interest rates to come down as long as "we hang in there with the president's program." Wriston told a meeting at the National Press Club that all "the blocks of policy are in place." He disagreed with arguments that rates are high because of Wall Street's worries over the budget deficit.
Meanwhile, the Business Roundtable, an organization of the chief executive officers of the nation's 200 largest corporations, threw its support behind the president yesterday. Reagan's critics are ignoring the fact that the program has not yet come into effect, the Roundtable said.
The Roundtable statement said the president should stay on course. In addition, there should be "further substantial reductions in the federal budget for the fiscal years 1982 through 1984," and Congress should give the president authority to make "limited withholding of authorized expenditures," the Roundtable said.
Wriston pointed out that even if next year's federal deficit is $20 billion above the president's $42.5 billion estimate, it will be smaller in relation to the size of the economy than was the budget deficit run by President Eisenhower when inflation was 1 percent a year.
Heller, on the other hand, criticized Reagan's economic package as containing a "basic contradiction" between tight money and an expansionary fiscal policy. The Federal Reserve's policy of money restraint, which the administration supports, will prevent any vigorous expansion in the economy, he told the Joint Economic Committee.
"In spite of the current down-tic in interest rates, a tight-fisted Federal Reserve policy clashing with a highly expansionary fiscal policy" will mean continued high interest rates, which will act as a brake on the economy, the former chairman of the Council of Economic Advisers said.
Meanwhile, the vice chairman of the Federal Reserve Board, Frederick Schultz, called for deeper cuts in federal spending to help offset the income tax cuts scheduled for 1983 and 1984. On a televison show to be broadcast in Georgia, Schultz said "we were worried about the size of the tax cuts when they were first proposed, but then they grew and grew, and they became of more and more concern to us, and they became of more and more concern to the financial markets."
He dismissed the administration's forecast of 5 percent growth next year as far too high. Both Schultz and Heller criticized advocates of a return to the gold standard, saying that this would lead to a depression.
Wriston agreed with comments made earlier this week by Federal Reserve Chairman Paul Volcker that Congress must cut spending further. Heller remarked that the tax bill was very irresponsible.