Budget office says economy will bounce back,warns against vigorous deficit cutting this year

GO SLOW:

January 22, 1992|By New York Times

WASHINGTON -- At the start of a presidential election year in which the economy is a central issue, the Congressional Budget Office is predicting that the economy will begin a weak recovery by the middle of 1992 and warned lawmakers not to endanger the recovery by resorting to radical changes in economic policy before the November election.

In a report to Congress, the budget office said yesterday the recession was likely to end within six months. But it offered no guidance so that President Bush and Congress would be able to withstand the mounting political pressure to stimulate the economy.

The report also included some bad news for Mr. Bush with its prediction that unemployment would be about 7 percent, despite the modest economic growth foreseen for the last half of 1992.

Unemployment is the most politically sensitive economic issue in a presidential election year. White House advisers have been debating how vigorously to attack unemployment and the low growth rate as a means of reversing the decline in Mr. Bush's popularity and combating the charges from his rivals that he lacks concern for people of average income.

In the report, the non-partisan budget office says that "the recession has made further deficit reduction inadvisable this year," but "the deficit should return to the top of the political agenda in 1993" because huge deficits cripple economic growth.

Robert D. Reischauer, director of the budget office, said last night: "The recovery is sufficiently weak that no one would want to jeopardize it through further deficit reduction in the current year. If you jeopardize the recovery with significant further deficit reduction, it would only add to the national debt and leave us in a deeper hole from which to climb out."

Mr. Reischauer was scheduled to present his conclusions at a hearing of the Senate Budget Committee today.

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