Nation Facing Slower Recovery: End of Talks Means a Slower Recovery
The breaking-off of budget negotiations between President Reagan and congressional leaders yesterday leaves the nation facing a string of huge budget deficits and continuing high interest rates, with little chance for a sustained economic recovery anytime soon.</br></br>Congress still could find some way to reduce the deficits. But, in the absence of major spending cuts and tax increases, interest rates are likely to stay so high that the important, housing and auto industries almost certainly will remain deeply depressed, according to a number of economists. The high rates also probably will lead businesses to keep cutting back their capital investment plans, the key to healthy, longterm economic growth.</br></br>Murray L. Weidenbaum, ReaganÛªs chief economist, recently said that even the $56 billion worth of spending cuts and revenue-raising measures proposed in the presidentÛªs February budget are not regarded as large enough to relieve pressures in financial markets and bring interest rates down. There will be ÛÏa slower, less robust recoveryÛ if there is no budget accord, he said. .</br></br>POLICY, From A1 mann, an economist at Morgan Stanley & Co., a New York investment banking firm, said last week that in the absence of ÛÏa significant change in the budgetary trend currently in prospect... we expect that any drops in interest rates will be shortlived, which should serve effectively to limit the scope of economic expansion this year and next.Û</br></br>One of the few points on which the administration and congressional negotiators agreed was that, without tax increases or further spending cuts, the 1983 deficit likely would be about $180 billion, and that figure assumed that the economy would begin growing at about a 4 percent annual 'rate at mid-year. A weaker economy could push this figure higher.