President Carter's chief economist asserted yesterday that inflation will drop to "significantly under 7 percent" next year and the economy will not fall into a recession, despite more pessimistic forecasts by most private analysts.
Charles L. Schultze, chairman of the Council of Economic Advisers, denied that the administration is "whistling in the dark" by continuing to be optimistic about the economy. He said signs of a more gloomy performance just "aren't here." Schultze commented on "Issues and Answers" (ABC, WJLA).
Private forecasters generally have been predicting a mild recession for 1979, with inflation edging down to about 8 percent, from 10 percent now.
swchultze also reiterated the administration's view that in some instances employers should risk strikes if necessary rather than give in to excessive wage demands. "It may be part of the price we have to pay," he said.
He also pointed to early signs of "success" in the administration's new wage-price guidelines plan in the form of pledges from businesses to adhere to the price standards. He said cooperation from labor would follow.
At another point, he expressed caution about a proposal by chairman Russell B. Long (D-La.) of the Senate Finance Committee to replace the Social Security payroll tax with a European-style value-added tax -- a form of national sales tax.
Schultze said that a period of rapid inflation "is a very difficult time to make the sort of tax adjustment" Long has proposed.He said the imposition of a value-added tax would raise consumer prices and push wages up further.