Inflation Isn’t Beaten Yet, Former U.S. Officials Say

A bipartisan group of former government officials said today that it is too soon for President Reagan to declare he has conquered inflation.

“The reduction of inflation to the neighborhood of 4% is in no sense a victory,” said a statement issued by Henry H. Fowler, Treasury secretary under President Lyndon B. Johnson, and Herbert Stein, chairman of President Richard M. Nixon’s Council of Economic Advisers.

They are co-chairmen of the Committee to Fight Inflation, a bipartisan group of 14 former government officials formed in 1980.

In his budget message to Congress on Feb. 4, Reagan, noting that consumer prices in 1984 rose 4%, said “inflation remains well under control.”

Cited ‘Economic Growth’

Two days later, in his State of the Union address, the President said “the best way to reduce (budget) deficits is through economic growth.”

Fowler and Stein disputed both statements, while adding that the prospect of continued high budget deficits is a major threat to reducing inflation.

The river of federal red ink, running at more than $200 billion a year, could force the government to deal with the debt through inflationary policies, such as simply printing more money to cover the shortfall, the analysts said.

“This possibility represents the ultimate inflationary threat inherent in the federal deficit, and it alone would warrant a strenuous effort to bring the budget under control,” Fowler and Stein said.

The analysts said a continued 4% inflation rate could seriously damage the economy and would cut the purchasing power of the dollar in half in less than 18 years.

Factors Could Change

Fowler and Stein added that it cannot be assumed that factors which have contributed to slowing inflation--a strong dollar and world reserves of oil and food--will continue unchanged. Major changes in any of those factors could push up prices.

Meanwhile, they said, the Federal Reserve Board’s tight money policies since 1979 have held down inflation by restraining the growth of private spending. The group, in an indirect reference to Reagan, rejected calls for a looser Federal Reserve policy.

Among other members of the group Fowler and Stein represent are former Treasury secretaries W. Michael Blumenthal, C. Douglas Dillon and William E. Simon, former Chairman of the Council of Economic Advisers Paul W. McCracken and former Federal Reserve Chairman William McC. Martin Jr.