Economy on ‘Thin Ice,’ Congress Panel Warns

The U.S. economy has been growing on borrowed money for the last five years and is now “skating on thin ice,” with few options for the government to employ in case of a downturn, the congressional Joint Economic Committee said today.

“It is possible that our policy apparatus will be able to sustain a sluggish rate of overall economic growth,” the committee said in its annual report. “But the traditional tools of macroeconomic policy are not now capable of contributing to a strong surge in economic growth, nor do they appear adequate to the task of moderating any future recession.”

Forecast Too Rosy

Sen. Paul S. Sarbanes (D-Md.), the committee chairman, said the report “shows that the economy is skating on thin ice.”

The Democratic-controlled committee said the Reagan Administration’s economic forecast, which foresees increasing economic vitality in the next few years, is too optimistic and doesn’t pay enough heed to warning signs.

The committee said renewed dependency on imported oil could expose the nation to future price shocks and accompanying inflation, similar to what occurred in the 1970s.

Huge federal deficits, which have doubled the national debt to more than $2 trillion during the Reagan presidency, have helped fuel the current recovery since the recession of 1981-82, the report said. But those deficits, along with increased borrowing in the private sector, have “significantly increased . . . financial vulnerability in the event of a future downturn,” the report said.

Sarbanes, reflecting a popular theme in the report and among Capitol Hill Democrats, said investment in education and technology research is necessary to ensure better productivity and continued economic expansion.

“If we fail to do that, we’re only setting back our efforts to produce a more prosperous economy,” said Sarbanes.

Republicans on the committee filed a separate report, notably more sanguine than the Democratic version. However, “this is not to say all is well in our economy,” said Rep. Chalmers P. Wylie (R-Ohio), the senior Republican on the panel.