Even as good news continues to roll in about the strength of the American economy, conservative economist Alan Greenspan sounds a cautionary note. It would be well for US government officials to ponder what he says, with an eye toward ensuring a continuation of the current recovery.
National economic statistics, issued late last month, showed that from April through June the US economy grew at a faster rate (an annual 8.7 percent) than anticipated, while inflation was down slightly.
Mr. Greenspan, chairman of the Council of Economic Advisers during the Ford administration, now warns it is imperative that the federal deficit be reduced if the recovery is to continue in the long run. He makes the reasonable suggestion that Congress and the White House hold top-level meetings and agree on ways to lower the deficit. The administration estimates it at $179 billion for the current fiscal year and over $200 billion a year through 1988.
Historically in Washington there has been far too much posturing over budgetary problems - especially with an election year coming up as one now is. Each political party too often seeks to blame the opposition for the nation's difficulties, economic and otherwise. With the deficit at a historic high the temptation will be strong for politicians to conduct business-as-usual through the November 1984 election. Indeed there has been too much blaming and too little cooperating in recent months.
But there is no reason why the non-cooperation of past election years must be repeated this time. Congress and the White House need to approach the nation's economic challenges in a statesmanlike spirit of reasonableness and compromise, rather than in an atmosphere fraught with political considerations.
Mr. Greenspan has his own broad ideas on areas for action, which at least are worth considering. He would increase some taxes and reduce spending, including outlays on defense and some federal programs which benefit individual Americans, such as medicare. In the latter case he would institute a financial needs test for medicare recipients, arguing that in this area among others the nation is promising to pay out more money than it is taking in.
An important element of all this, as he says, is that politicians have the courage to act in the nation's best interest, not merely in the way that might gain the most votes.
The most serious problem for the economy lies beyond 1984, Mr. Greenspan says. In his view there must be congressional and White House agreement on deficit reduction by the end of next year to prevent the deficit from choking off recovery.
Why wait until the end of next year? It is time now for Congress and the White House to move away from the economic confrontation that has been evident so often in recent months, and reach a solid political agreement on firm steps to reduce the deficit.