Economy More Vulnerable, Panel Warns

The U.S. economy has been growing on borrowed money for the past five years and is now in a precarious position, with few options for the government to employ in case of a downturn, the Joint Economic Committee said Thursday.

“It is possible that our policy apparatus will be able to sustain a sluggish rate of overall economic growth,” the congressional 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.”

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

Would Heed Signs

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 does not 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 1981-1982, 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,” it said.

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

Republicans More Sanguine

Sen. John Melcher (D-Mont.), a member of the committee, said Congress must heed the increasingly international nature of the economy and pay more attention to farm exports.

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.

Deficit-Reduction Efforts

Although there is evidence of “tremendous resilience” in the economy, he said, Congress must not falter in its deficit-reduction efforts and “we do not feel raising taxes is a better idea.”

Sen. Steven D. Symms (R-Ida.), another committee member, called the report “an opportunity for Congress to air ideas.”

However, he said Democrats were espousing gloomy “myths” about the economy. Symms contended that plant closings and trouble in some sectors of the economy, notably the oil industry, were being offset by expansion elsewhere.