New Carter Economic Team Faces Tightening Policy Box
President Carter and his newly revamped economic team are facing a policymaking box in their efforts to steer the economy through the 1980 elections. The dilemma: How to cope with the coming recession without exacerbating inflation and provoking another slide in the dollar.</br></br>Although Carter has calmed some market jitters with his nomination of Paul A. Volcker, former undersecretary of the Treasury for monetary affairs, as chairman of the Federal Reserve Board, the fact is that the problems are no less serious now than before the president began his reshuffling.</br></br>Indeed, many experts believe that, if anything, the nomination of Volcker is likely to make it tougher for the White House to achieve its goals, Volcker, who is more sensitive to the dollarÛªs troubles than outgoing Fed chief G. William Miller, may keep monetary policy tighter than his predecessor would have.</br></br>The predicament is a frustrating one. In previous years, when a president feared the prospect of a coming recession, the first thing he would do would be to stimulate the economy. In 1977, for example, Carter proposed a major cut in income taxes and a big new job-creation program. Congress approved them both.</br></br>This time, however, inflation is so virulent that even many liberals fear that additional stimulus would heighten the wage-price spiral. Both Carter and Congress have urged caution on the tax-cut front. And some analysts argue that any cut should involve Social Security taxes, which would be less inflationary.