YOU WILL HARDLY feel the jolt at all, President Carter assures you, if you will only keep cool and cooperate. "I believe that any recession will be mild and short," he said last week. Well, maybe.
But the economy is now moving through a time of great uncertainty, and the people who make policy will have little flexibility over the coming months to amend any miscalculations. Interest rates are beginning to come down a little -- but they can't come down much without generating a repetition of last winter's financial crisis. Congress is forcing the federal budget toward balance, and can't reverse itself without starting another ripple of inflation panic.
The administration repeatedly underestimated the danger of inflation through its first three years of office, and now there's some reason to think it may have overdone the antidote. Budget cuts, tax increases, oil costs and high interest all push toward business contraction. but the administration had little choice. Last month it was forced to construct, rapidly, a dramatic and convincing response to the emergency created in the financial markets by inflation. Having taken a position, it must swallow its doubts and hope for the best.
Mr. Carter is now beginning to take out storm insurance. He's trying to find a little money for housing industry and some credit for the farmers. He's reminding the auto workers that the German and Japanese companies are going to be hiring for new factories in this country. Those are gestures that will help a little in hardship cases.But they won't have much effect on the dimensions of the decline that is now beginning.
Of all the things that are hard for economists to predict at this point, public reactions are the hardest. Perhaps it's worth saying that, when the government has little room for maneuver, a great deal depends on individual citizens' responses. Throughout most of the past decade, working people have generally been surprisingly moderate in pursuing wage increases. Without that moderation, the present inflation rate -- and the social costs of reducing it -- would have been even greater. In a time of declining production, restraint in wage demands has important public benefits. It helps hold down unemployment.
Oil conservation also helps hold down unemployment. A widening of the trade deficit will act as a brake on the economy and will make the recession worse. The less oil Americans buy this year, the less pressure on the trade deficit. The enormous increase in American spending on foreign oil in 1974 contributed heavily to the unexpectedly severe recession in 1975, when unemployment hit 9 percent. Cutting down on driving is, more than ever, a public obligation. People who use their cars unnecessarily have no right to complain about poor performance of the economy; they are contributing directly to it.
Perhaps Mr. Carter will turn out to be right in predicting a mild and short recession. Perhaps not. The administraton has made its basic decisions and now can only wait as the consequences developl, one day at a time.