The recession taking hold in the American economy will be "sharper than the rhetoric coming out of Washington," an administration adviser has predicted.
Paul McCracken, a University of Michigan economist and member of President Reagan's Economic Policy Advisory Board, told members of the Grand Rapids Economic Club on Monday that "within the last three or four weeks, we've heard too many reports from businesses where new orders are drying up."
He said the economic developments "are not what one had anticipated when the new crew came aboard," but he said he felt the Reagan administration's economic policy is on the right track.
However, the administration will be forced to increase taxes, probably in 1983, McCracken said.
"There is no ability to balance the budget on the spending side alone," McCracken said.
In contrast to McCracken's assessment, Treasury Undersecretary for Monetary Affairs Beryl Sprinkel yesterday reiterated his forecast of lower interest rates and a "mild recession."
Sprinkel told reporters he is increasingly confident that short-term and long-term rates will continue to drop but declined to give a specific forecast.
Meanwhile, the Commerce Department reported yesterday that prices for new single-family houses rose 0.6 percent in the third quarter to an average of $84,400. The increase was the slowest for any quarter since the end of 1979, when prices fell 2 percent.