President Carter's chief economist warned yesterday that the extraordinary inflation of the last few months has begun to spread beyond just energy and mortgage interest costs -- "a very, very dangerous development."
Charles L. Schultze, chairman of the Council of Economic Advisers, made his remarks one day after the Labor Department reported consumer prices continued to rise last month at an 18.2 percent annual rate.
Schultze told a labor conference the administration's previous policies had been aimed at keeping double-digit inflation from spreading beyond energy and housing. He implied that those policies had failed.
His remarks came as the administration went through another day of mixed results in its efforts to get Congress to approve Carter's new budget-cutting proposals.
Meanwhile, Carter told a White House Conference on Aging that the budget cuts he will propose won't affect programs for the elderly, such as Social Security, Medicare, Supplemental Security Income and meals-on-wheels.
The White House confirmed yesterday that the budget cuts will total about $15.5 billion for fiscal 1981, rather than the $13 billion to $14 billion Carter promised a week ago. Plans are to disclose them officially Monday.
Carter won one victory on Capitol Hill yesterday as the Senate Agriculture Committee, under heavy pressure from the White House, agreed to cut back a group of bills to aid farmers affected by the Soviet grain embargo.
At the same time, the White House lost a post-New York primary effort to get the House Budget Committee to provide $500 million in extra aid to cities to help mitigate other proposed Carter cutbacks.
Carter political aides had been pressing the Budget panel for the funds to soothe New York voters, but were rebuffed in earlier sessions. Yesterday, the committee again rejected the extra money, 18 to 7.
The committee also resolved an accountancy problem that had threatened to hold up the fiscal 1981 budget resolution it approved last week. Panel leaders now hope to send the measure to the floor as early as Friday.
The accounting problem was solved when the panel scrapped a provision calling for $3.5 billion in new revenues, which would have boosted the projected budget surplus from $2 billion to $5.5 billion.
The revised resolution now calls for a $2 billion surplus, not counting the $10.3 billion expected to be raised by Carter's new oil-import fee. Conservatives feared that listing a larger prospective surplus would only invite more spending.
Schultze's remarks yesterday helped depress the stock market. The Dow Jones industrial average, which had risen 10 points during earlier trading, plummeted after Schultze's talk to close almost 6 points off.
Some traders also were reported concerned by a rise in the key federal funds rate -- the interest charged on overnight loans among banks -- to 22 percent, from 18 percent before. However, analysts said the increase stemmed only from technical factors and the rate was likely to return to about 18 percent today.
Separately, the Senate Budget Committee began work on its own version of the fiscal 1981 congressional budget resolution, with intentions of complying with Tuesday's Senate floor vote to report out a balanced budget.
Chairman Edmund S. Muskie (D-Maine) offered no hints as to which programs his committee might cut. However, the Senate plan generally is expected to follow that of the House Budget Committee.
Meanwhile, a survey conducted by the U.S. Conference of Mayors shows more three out of four of the nation's largest cities are facing or soon will face financial problems and would suffer from a cut in revenue-sharing grants to states. Both Carter and Congress appear ready to eliminate these grants.
John Gunther, executive director, said in a statement "this is no time for hasty budget cuts which would force" cities to "raise property taxes or curtail basic services." The survey, taken this month, covered 45 of the nation's 50 largest cities, and 55 other municipalities chosen at random.
Yesterday's vote in the House Budget Committee rejected a proposal by Rep. David Obey (D-Wis.), leader of the panel's liberal bloc, to add $500 million to revenue-sharing grants to cities, to help offset other cuts the panel has voted.
Although liberals hinted broadly that approval of the Obey plan might prompt them to reconsider their opposition to the overall budget resolution, Republicans and other Democrats refused.