In their annual report to Congress, Democrats on the Joint Economic Committee of Congress yesterday proposed an easier money policy, deferral of the July 1983 individual income tax cuts and a halt to cuts in social programs.
Republicans on the committee published a separate report that backed President Reagan's economic policy, argued against any rollback of the proposed tax cuts and in favor of new spending cuts, and called for a "renewed commitment by the Federal Reserve to maintain a steady, consistent, noninflationary monetary policy."
Rep. Henry Reuss (D-Wis.), chairman of the JEC, said yesterday that the Democrats had decided to "put up" in response to Reagan's challenge to opponents of his 1983 budget to "put up or shut up." The administration's program "is causing vast and unnecessary hardship, with a virtual guarantee that huge future deficits will overwhelm any temporary abatement of inflation once economic recovery is permitted to begin," the Democrats said.
They rejected the notion "that unemployment is necessary to fight inflation." Reagan has said that his economic strategy will lead to more growth as well as lower inflation. But the JEC Democratic report argues that the tight money policies followed by the Federal Reserve, and backed by the administration, will hold back the economy and work against inflation by keeping unemployment high.
The JEC has been split along partisan lines in this Congress, and several of its reports have in fact been two separate reports. The Republicans in yesterday's recommendations followed Reagan's program closely. Despite the present recession and high interest rates, "we reject calls for a change in direction, for tax increases, or a return to the worn-out Keynesian policies which got us into the current economic mess," they said. "We recommend continuation and enhancement of the program which is already in place."
The Democrats argued that incomes policy should be used to help fight inflation, rather than relying on slow growth and tight money. Although they opposed further domestic spending cuts during the recession, large future budget deficits should be cut, they argued.
A shift in the mix of fiscal and monetary policies--with easier money than now planned combined with smaller budget deficits--would allow lower interest rates and more balanced growth, the Democrats said. Many of their recommendations centered around reducing interest rates.
They advocate a program of "credit conservation" whereby the administration and the Federal Reserve would encourage banks to make capital available for small businesses and farms, rather than allowing "destabilizing bursts of bank-financed lending for unproductive purposes such as large corporate takeovers.
Administration officials have recently complained that short-run fluctuations in the money supply have been largely to blame for high interest rates. The Democrats reject this and say that volatility in money did not significantly damage the economy in 1981.
In the short term, the Democrats say, Congress should move swiftly to alleviate the hardships of the unemployed. Unemployment benefits should be extended to assure a maximum of 39 weeks coverage in all states. Many of the spending cuts enacted last year would not have been passed by Congress, the Democrats say, if it had not been for Reagan's optimistic assessment of the economy.
Other recommendations include building up the infrastructure of the economy, by restoring spending on transport, water systems, utilities and so on which have been cut under the Reagan program; encouraging housing; promoting competition and reversing the antitrust stance of the Reagan administration; reforming the tax structure so as to ensure a fairer income distribution, and developing particular "opportunities for growth and revitalization of the U.S. economy, such as the semi-conductor industry and the coal industry."