Americans have a chance to enjoy a long period of economic growth and stability, but only if Congress and the White House act quickly to curb federal budget deficits.
So warned Federal Reserve Board chairman Paul A. Volcker in testimony before the House Banking Committee Tuesday.
''We have a lot of good things going for us,'' he said, including relatively stable energy prices, rising productivity, and relatively mild inflation.
''What has been going on can be not 'just another' cyclical recovery,'' he argued.
But the upbeat possibilities are very much at risk, he said.
The budget deficit, and the trade deficit it helps cause, pose what Mr. Volcker called ''a clear and present danger to the sustainability of growth and the stabilty of markets, domestic and international.''
Meanwhile, the nonpartisan Congressional Budget Office (CBO) released estimates showing that the budget deficit in fiscal 1989 could hit $326 billion - $203 billion higher than the Reagan administration's '89 estimate.
The Fed chairman says he favors a minimum deficit reduction of at least $50 billion in one year.
''I'd like to see a big bite,'' he says.
By comparison, the $100 billion deficit ''down payment'' plan proposed by President Reagan would reduce the red ink over a three-year period. It might not take a $50 billion bite off the deficit until the third year of the plan, Martin S. Feldstein, chairman of the Council of Economic Advisers, said last week.
The nation has time to take defict trimming steps, ''but in my judgment not much time,'' Volcker said.
His warning was echoed by CBO director Rudolph G. Penner, generally regarded as a conservative economist. His office released its economic forecast and budget projections Tuesday.
The CBO's economic forecast for 1984 closely parallels the upbeat outlook from the White House. For '84 as a whole, the CBO predicts inflation-adjusted economic growth of 5.4 percent, consumer price hikes of 4.5 percent, and an average unemployment rate of 7.8 percent.
Because of the deficits, however, ''the risks (to the economy) are enormous even in the short run,'' Mr. Penner told the House Budget Committee on Tuesday.
The deficits have Wall Street worried. Since Jan. 6, when the Dow Jones industrial average reached its 1984 peak of 1,286.64, the widely watched stock index plunged 110 points through Monday. Concerns about the course of the economy and the deficit helped trigger the slide.
Those concerns will not be calmed by the CBO's estimate of how large the deficit will be in future years if no corrective action is taken. The office's deficit estimates are larger than the administration's for a variety of reasons. For example, the administration forecast assumes Congress will adopt President Reagan's budget proposals and also assumes very low interest rates in future years.
The CBO, on the other hand, assumes that current spending policies will continue and is less optimistic about the course of interest rates.
Interest costs are ''the most rapidly growing category of spending,'' Penner says. The CBO projects that net interest costs will more than double, from $108 billion in fiscal 1984 to $219 billion in '89.
Volcker sent strong signals to the financial markets that the Fed will not move to lower interest rates by speeding the growth in the money supply. All other things being equal, the more money in circulation, the less it will cost to borrow that money.
While lower interest rates are desirable, ''attempts to accomplish that desirable end by excessive monetary growth would soon be counterproductive,'' he says. That is because higher money-supply growth could feed concerns about inflation, thereby pushing interest rates up.
In taking this tight-money course, he was clearly sending a signal that in his view, the path to lower interest rates runs through Capitol Hill, not through the Fed.
On Monday, the Fed released revised monetary growth projections for 1984 that were just a notch tighter than the preliminary '84 projections set last year. The ranges for growth of the various measures of money were set between one-half and one percentage point below the money supply growth projections in effect for the final months of 1983. It would be best for the economy if the deficit were cut by trimming spending ''rather than by an increase in taxes,'' Volcker said.
Finding such spending cuts will be difficult, Penner notes, because ''very few programs are responsible for the bulk of federal outlays.'' The CBO projects that by 1989 spending on defense, social security, medicare, and net interest on the debt will be equal to almost 100 percent of total tax revenues.
The budget deficits are closely linked with the trade deficits Volcker finds troublesome. Deficit-induced high interest rates in the United States attract foreign investors, who are seeking a better return on their money than they can receive at home. When they buy dollars to make their investments, that pushes up the dollar's value and makes it more difficult for US firms to export. But the foreign funds also help finance the US budget deficit.
In addition to hurting US exports, the current pace at which foreign capital is flowing into this country ''does not appear sustainable over a long period,'' Volcker warned. The resulting US credit squeeze will be more painful ''if our federal financing needs remain so high.''