WASHINGTON -- The economy will sputter along for several more months, but Congress should refrain from acting hastily to stimulate growth in any way that would roil the financial markets, the Bush administration's three top economic advisers said yesterday.
"My qualitative assessment is that the economy likely will be relatively sluggish over the fourth quarter of 1991 and the first quarter of 1992," said Michael Boskin, the chairman of the Council of Economic Advisors, who is currently revising the administration's economic forecast in connection with preparing the President's fiscal 1993 budget.
"The economy should pick up thereafter, most probably sometime in the spring of 1992. This assessment is quite similar to that of most private forecasters," he told the House Ways and Means Committee yesterday.
Mr. Boskin acknowledged that the economy faces several "downside risks" that could cause it to fall back into recession, including sharp cutbacks by state and local governments, the continuing credit crunch, the debt overload among households and businesses, and the mysteriously lackluster response to dramatically lower interest rates.
He insisted, however, that the economy eventually would rise above those risks and be buoyed by the lower rates, the improved competitiveness of U.S. exports, the need to rebuild inventories, and lower inflation. All of those factors "leave the Federal Reserve in a better position to take necessary actions to improve the economy," he added.
Treasury Secretary Nicholas Brady agreed that the economy is in "a transitional phase" of slow growth, but will avoid dipping back into recession.
Because of the economy's fragile state, and the volatility of the financial markets, he and Richard Darman, director of the Office of Management and Budget, cautioned against attempting to enact stimulative legislation before President Bush presents some new growth proposals with his budget in January.
"No one wants to act quickly and pay a price later for thoughtless haste," Mr. Brady said, quoting Ways and Means Chairman Dan Rostenkowski, D-Ill. Instead, he said Congress and the administration should "lay aside election year politics" and attempt to draft a compromise to overcome both the short-term problems of consumer and business uncertainty and the long-term problems of low savings and productivity.
The administration officials said the President would propose new tax incentives in his budget next year, and work with Congress to provide tax relief to the middle class, but they said he would refuse to go along with raising taxes to pay for such initiatives.
Instead, to offset the tax breaks as required under teh 1990 budget agreement, Mr. Darman said the administration would seek additional cuts in mandatory spending programs. He also suggested, however, that the administration was considering a partial exemption or modification in the budget law's pay-as-you-go requirements to permit enactment the tax cuts.
"We very much hope that we can continue to live within the discipline of the budget agreement, but our first consideration should be to restore short-term growth," he said.
In a seeming disagreement, Mr. Boskin said later in questioning by the committee that the administration would not likely agree to any significant relaxation of the budget rules "unless the economic outlook deteriorates significantly" from what the administration is now projecting.
Mr. Brady and Rep. Rostenkowski were both emphatic that Congress and the administration should avoid getting into a tax cut bidding war, and that any tax relief plan should comply with the budget law.
Saying any flagrant disregard of the country's record deficit levels could send interest rates soaring, Mr. Brady said, "I hope we don't go outside of the budget agreement next year."
Meanwhile, President Bush announced yesterday that the government will speed up $9.7 billion in authorized spending for several government programs during the first and second quarters of next year to help give the economy a "shot in the arm."
He did not name the specific programs, but said they involve agriculture, housing, defense, transportation, commerce, and general services.
"These are programs for which funds have already been appropriated, and were we can spend the money now, instead of later, while preserving the spirit and integrity of the funding process," President Bush said at a press conference announcing that Transportation Secretary Samuel Skinner was named White House chief of staff, succeeding John Sununu who resigned Wednesday.