Taxpayers caught in the inflationary spiral of escalating prices, taxes, and government spending can expect more of the same in 1981, according to a troika of Midwestern economic forecasters.
New bites into consumer pocketbooks must be made over the year ahead, these economists warn, if President-elect Ronald Reagan is to regain control over a runaway economy before the end of his first term.
So expect a tough year ahead. But blame President Carter, not Mr. reagan, some 2,000 Chicago area executives were told at the 27th annual economic forecast session sponsored by the University of Chicago's Graduate School of Business.
Walter Fackler, the university's business economics professor, said that Mr. Carter "inherited a fairly comfortable economic situation and then he blew a singular opportunity to lead the economy onto a stable noninflationary growth track."
Harris Bank vice-president Beryl Sprinkel said Carter's policies "have left a residue of high inflation, volatile economic performance, and stagnated productivity."
University of Chicago marketing Prof. Irving Schweiger agreed that Reagan is inheriting an economic mess due to the Carter administration's "bumbling that converted a modest recession into the steepest slide in our modern history, followed by wildly inflationary spending and monetary measures to reflate the economy, followed by restrictive measures to deflate the inflation -- all of the above within a seven-month span."
All agreed that part of the Carter legacy is that Reagan and the country must accept increasing government spending and a 1981 federal deficit which will stick at $50 billion to $60 billion.
"President-elect Reagan inherits an awful economic situation with little room for maneuver," said Mr. Fackler, who expects a gradual recovery but "a recovery very vulnerable to a replapse."
All three tied economic recovery to Reagan's carrying through on his campaign promise of immediate tax cuts. But even with cuts, they see problems for both the public and the President.
Because of the inherited "economic mess," said Mr. Sprinkel, "corrective policies will bear a high cost in the year ahead." He explained that with continued high inflation and only marginal improvements in real disposable personal incomes, "Reagan will not be nearly as popular a year from now as he is today." TMr. Schweiger reflected the forecasters' shared caution in concluding that: "The economy is expected to waver on the brink of recession in early 1981. If there are no new international crises and if significant tax cuts are enacted by April, recession will be avoided and a moderately paced recovery will be under way. Unemployment will continue to increase, in any case, until midyear, reaching a peak rate of 8.5 percent. Inflation will moderately only slightly and will average 8.7 percent."
Even if Reagan cuts taxes and exerts firm control over the Federal Reserve System, Fackler and sprinkel expect steep price increases to confront consumers in 1981, ranging from 11.4 percent to 13 percent.
In their 20th consecutive year of giving the University of Chicago's year-end forecast, Fackler, Sprinkel, and Schweiger all agreed that to pull out of the Carter economic stall the country must accept short-term costs in the interest of long-term recovery.
"Public support may wane as the full costs of the nation's adjustments become painfully clear," said Sprinkel. ""Unfortunately, the kinds of economic policies that will ultimately correct our present economic malaise have a high short-run price tag."