Deficit ‘challenge’ to U.S. economy

Press, 12 June 1984, Page 32

Deficit ‘challenge’ to U.S. economy

NZPA-Reuter Washington United States economic growth will exceed 5 per cent this year even though the economy is slowing down, according to the outgoing presidential economic adviser, Martin Feldstein. The chairman of the White House’s Council of Economic Advisers said in a speech at the week-end, that in 1985 the economy would continue to expand “at a desirable rate, with rising incomes and falling unemployment.” Mr Feldstein said recently that real economic growth would slow to between 3 and 6 per cent in the second quarter after

surging at an unexpectedly high annual rate of 8.9 per cent in the first quarter. Mr Feldstein said in his latest speech that inflation would remain under control, even though unemployment has been receding, as wage increases had been moderate and industrial raw material prices stable. “It is reasonable to expect that the inflation rate for 1984 will be 5 per cent or less,” he said. His forecast contrasts with predictions by a growing number of private United States economists, who expect inflation to increase to about 7 per cent by the end of the year.

Mr Feldstein said the major challenge facing American economic policy in the years ahead would be to cut the Budget deficit without upsetting economic recovery. A deficit package which Congress is expected to adopt soon must be followed by further cuts in 1985, he said. The White House has yet to name Mr Feldstein’s successor. He leaves office next month to return to Harvard University. He has often been at odds with other Reagan Administration economic advisers over his views on the Budget and monetary policy.