Now that the giant US economy is at long last roaring along at torrid speed, it is time for the Reagan administration and Congress to take careful control of the economic wheel to ensure that the recovery proves pervasive and durable. That means that elected officials must put aside blatantly political considerations and take the tough steps necessary to bring under control projected annual budget deficits that are estimated in the range of $200 billion and more.
There can be little doubt that the recovery is finally under way. Consider how extensive the turnaround has been in recent weeks: During the second quarter of 1983 the economy grew at a sizzling 9.2 percent rate, even better than the 8. 7 percent growth that the government had estimated a month ago; after-tax corporate profits shot up by 15 percent in the same quarter, in dollar terms the highest gain ever recorded; factory use in July hit 76 percent, the highest level in two years; unemployment is down slightly, to 9.5 percent for July, compared to 10.0 for June; inflation, meantime, continues to poke along at a desirably slow rate, underscored by the modest 0.4 percent increase in consumer prices for July announced yesterday.
In short, then, there is much good news on the economic front. But that is exactly why it is so important that Congress and the Reagan administration not be lulled into a sense of complacency about the extent and durability of the recovery. Indeed, warnings are now coming from economists on both the right and left of the political spectrum, including such respected experts as Alan Greenspan, Alice Rivlin, Lawrence Krause, Robert McNamara, and Barry Bosworth. Their concern is that the massive budget deficits, which are expected to last through 1986, could actually abort the recovery as extensive borrowing by government keeps interest rates high (or sends them higher) and chokes off private credit needs.
Currently, there is no such collision between government and private borrowing, inasmuch as business borrowing has remained fairly low. The concern pertains not to the immediate moment, but to the period down the road - in early 1984 and beyond. The danger is that, if the government fails to take steps now to prevent such a credit crunch, it will find it almost impossible to do so next year because of political pressures resulting from the presidential election.
Steps that need to be taken - although admittedly politically difficult - are clear:
* Taxes will have to be raised. As noted by Congressional Budget Office director Alice Rivlin, tax revenues are expected to shrink to 18 percent of gross national product by 1987. Yet government revenues will stay steady at about 24 percent. Obviously such an imbalance cannot be allowed to continue.
* Federal spending will have to be reduced. That means, for example, slowing the rate of increase in the defense budget, reducing huge outlays for veterans benefits, and trimming back farm programs.
* More waste will have to be cut from the federal government. A recent presidential commission identified ways by which better management could reduce unnecessary federal costs, including ending cost overruns in defense programs.
The American people can take heart that the United States is at last emerging from the widespread recession of the past months. What is now imperative is that the nation's highest elected officials act responsibly and cooperatively to ensure that the recovery remains on track - and extends into the remainder of the decade and beyond.