Pulling through recession
THE BATTALION Page 7
WEDNESDAY, SEPTEMBER 17, 1975
US still faces grim future
Associated Press
WASHINGTON — The United
States is pulling out of the worst
recession since the 1930s, but
Americans face unemployment and
high prices for years to come, the
Congressional Budget Office said
Tuesday.
The budget office. Congress’
counterpart to the president’s Of
fice ol Management and Budget, of
fered two possible strategies. One
would speed up economic activity to
provide more jobs. The other woidd
he aimed at trying to hold down in
flation.
Forbidden to make recommenda
tions, it advocated neither, but pro
jected the expected consequences
of both.
The nation’s recent surge in
prices is particularly alarming be
cause it has been largely concen
trated on necessities, said Alice Riv-
lin, an economist who heads the
budget office. She told a news con
ference the surge could endanger
the still-young recovery.
“When inflation is concentrated
on food and fuel, consumers have to
buy them anyway,” she said. “There
is little money left over for other
purchases, and the economy suf
fers.’’
A second danger, Mrs. Rivlin
said, is that continued price in
creases will trigger another round of
large wage increases, spinning the
inflationary spiral even higher.
“Some of the present favorable
factors may be temporary,” she de
clared.
The budget office forecasts sub
stantial economic recovery until at
Kissinger warns
against oil hike
Associated Press
VIENNA — The economic commission of the Organization of
Petroleum Exporting Countries began preparations Tuesday for a
ministerial gathering that could boost the price of oil. U.S. Secretary
of State Henry A. Kissinger issued a strong warning against such an
increase.
The average OPEC oil price is now $10.46 a barrel.
Commission members, mostly high officials of economics and
finance ministries of the 13 OPEC governments and the group’s
Vienna headquarters, were tight-lipped about their deliberations.
However, Kissinger told the Southern Governors Conference in
Orlando, Fla., that the oil exporting nations are moving in the direc
tion of another price jump. He warned that it could seriously jeopar
dize U.S. relations with the oil producers and endanger efforts to
stabilize the global economy.
The economic commission will prepare recommendations for the
Sept. 24 meeting of OPEC oil ministers, who will decide whether to
continue the present oil price freeze, which expires Sept. 30, or raise
prices. OPEC members account for 80 per cent of world oil trade.
Although the commission is expected to conclude that a price
boost for crude oil is in order to offset the effect of Western inflation on
the revenues of oil exporting countries, it was considered anybody’s
guess if the ministers would follow such a recommendation. The
ministers have rejected the commission’s recommendations for price
boosts on at least two previous occasions.
The ministerial session is expected to become a clash between
“price hawks ’ and “price doves, with forecasts ranging from no price
increase at this time to one of 35 per cent. Saudi Arabia, the No. 1
producer among OPEC members, is on record as saying that it is in
the interest of all concerned to delay a price increase.
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least mid-1976, but added that
Americans will continue to be
plagued with the nation’s unpre
cedented combination of high un
employment and high prices at least
through 1977.
By the end of 1976, its report
said, the unemployment rate which
has remained over 8 per cent this
year should be down to the range of
6.9 to 7.6 per cent. This still would
mean 7 million Americans without
jobs.
During the remainder of this
year, the report said, prices are
likely to continue increasing at an
annual rate of 6 to 8 per cent. A
surge of increases, especially in food
and fuel prices, brought the rate up
to 12 percent in June and July 1975,
the report said, but the rate has
since subsided — though not to the
levels of early 1975.
A speedup in economic activity,
the report said, would require con
tinuing the temporary tax cuts in
effect for this year, reducing taxes
an additional $15 billion and in
creasing federal spending by $10
billion, all effective in 1976.
Additionally, the Federal Re
serve would be expected to allow
the money supply to grow enough to
hold down interest rate increases.
The opposite strategy would be to
end the temporary tax reductions by
Jan. 1, 1976, cut spending $5 billion
and keep monetary growth at a rela
tively low rate.
The expansionary strategy, the
budget office said, would lower un
employment by 1.1 per cent at the
end of two years— meaning about 1
million more jobs — but would raise
the rate of inflation for some years
ahead by a maximum of five-tenths
to seven-tenths of one per cent.
It would increase the federal de
ficit, although the budget office re
port said much of the tax and spend
ing cost would be offset by higher
revenues and lower unemploy
ment.
The restrictive strategy, the re
port said, would raise the un
employment rate by nine-tenths of
Arab price
hike termed
‘dangerous’
Associated Press
ORLANDO — Secretary of State
Henry A. Kissinger said Tuesday
that an anticipated price hike by
Arab oil producers “would seriously
jeopardize U.S. relations with
those nations and have serious re
percussions throughout the world
economy.
Kissinger declared in an address
to the Southern Governors Confer
ence that all countries, particularly
the poorer ones, “have an interest to
avoid this.”
And the secretary said it is essen
tial that the United States and its
industrial allies get together on an
over-all energy policy before
another Arab price increase is an
nounced.
Kissinger, who later headed for
Cincinnati and another public ap
pearance Tuesday night, did not es
timate what the new oil price might
be. But he pointed out that the cost
of Arab petroleum has climbed 500
per cent in the last five years.
The Secretary spoke sternly —
although indirectly — concerning
the next expected jump.
“The United States cannot en
trust its economic and political de
stiny to decisions made elsewhere,”
Kissinger said.
In other matters, Kissinger told
the 13 governors that the Ford Ad
ministration’s request for aid to Is
rael this year “will be below $2.5
billion, in the range of $2.2 or $2.3
billion.
He did not give a figure for aid to
Egypt, previously estimated by offi
cials at between $600 million and
$800 million. However, be de
fended aid to Egypt as important in
cementing American influence in
Cairo and in stabilizing the Middle
East situation generally.
one per cent at the end of two years
( and lower the inflation rate for sev
eral years, with a maximum reduc-
jtion of three-tenths to four-tenths of
jone per cent. It would lower the
deficit, but not by the total amount
involved in the spending and tax
moves, the report.
The economic recovery, Mrs. Riv
lin said, can be credited largely to
declining inventories, causing
businesses to begin to think about
replenishing them. She said it also
can be credited to consumer spend
ing spurred by the temporary tax
cut and increased Social Security
payments.
“To sustain the recovery some
thing else has to happen,” she said,
“more housing, more automobiles
sales, more spending on capital
goods. We don’t see that yet —- we
just don’t see the future clearly after
mid-1976.”
Immediate decontrol of domestic
oil prices “would add nearly 2 p e r
cent to the general price level and
could retard or even abort recov
ery,’ the congressional report
warned.
Authority to control prices has
lapsed and Congress and President
Ford are still at odds on a long-range
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energy policy. So far, however, oil
companies have not generally raised
prices.
Decontrol phased over a substan
tial period, such as the 39 months
under discussion, would have little
immediate effect on the economy,
Mrs. Rivlin said. But she said there
would be an appreciable effect by
late 1977 and that this effect was not
taken into account in preparing pro
jections for the report.
In any case, U.S. motorists can
expected to be paying at least 2
cents a gallon more at the filling sta
tions soon, the report said, because
the Organization of Petroleum Ex
porting Countries plans oil price in
creases.
It added, however, that the in
crease might not be as great as had
been feared, perhaps not exceeding
$1.50 a barrel.
The projections also assumed
that the $2 a barrel tax on imported
oil imposed by Ford would be drop
ped, either by agreement with
Congress or by a court ruling that
the President did not have the au
thority to proclaim it.
The average price of foreign oil
from major oil producing companies
is $10.46 per barrel.
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