Only Way to Trim Deficit, Report Warns: Cut Spending of Raise Taxes, CEA Says
The annual report of the presidentÛªs Council of Economic Advisers warned yesterday that, if federal spending is not cut sharply, taxes will have to be raised to bring down the budget deficit.</br></br>The report, which accompanied President ReaganÛªs yearly economic report to Congress, indicated that the current strong economic expansion eventually would be undermined if the budget deficits are not trimmed in future years.</br></br>While stressing the need for action on the deficit, William Niskanen, the remaining member of the CEA, also emphasized the cur-</br></br>Federal Reserve Board Chairman Paul A. Volcker, who followed Niskanen at the hearing, warned of the nationÛªs swollen trade deficit as well as budget deficits, noting that the United States ÛÏis in the process of moving from the worldÛªs largest creditor to the worldÛªs largest debtorÛ and no longer can rely on foreign investment to help finance its deficit in international transactions.</br></br>The CEA report predicted that what so far has been the strongest economic expansion in 30 years will continue in 1985: The gross national product will grow 4 percent and See REPORT, DIO, Col. 3 consumer prices will go up 4.2 percent. Beyond this year, the CEA report projects continued healthy growth and declining inflation, interest rates and unemployment. But those projections are conditional on adoption of the proper government policies, including cutting federal spending and a predictable, moderate growth of the money supply.