Laffer Sees Rising Interest Rates and Short Recession

Supply-side economist Arthur Laffer told a seminar of leading Southland home builders that interest rates are likely to rise later this year, followed by a short recession early next year.

Laffer, a member of the Economic Policy Advisory Board to the President, spoke at the first Los Angeles Times Leading Builder Breakfast, held Tuesday at Coto de Caza, the south Orange County housing and recreational development of Arvida Development Co. and Chevron Land & Development Co.

The current $1.1-trillion budget offered by President Reagan represents a compromise and conciliatory gesture that should bring results and agreement between the White House and the Congress as they continue to deal with the budget and trade deficits, he said.

“The nation’s deficit is not the problem. The politicians are the problem,” he said. They must curtail government spending because “If you don’t have enough money (to support your family) you don’t go to the boss and ask for a raise,” he added.

He also predicted a slowdown in the nation’s growth and a drop in imports, but urged that trade protectionism should not be legislated.

During a question-and-answer session, he urged builders, faced with continuing slow-growth measures, to get more involved in the political process and to exercise their great potential as a “strong pressure group” with elected officials.

Coto de Caza’s John Yelverton and the Los Angeles Times’ Don Clark and Joan Heid, director of classified advertising, and classified, retail and general display advertising manager, respectively, represented the sponsors. Bryan Hardwick, marketing specialist, served as master of ceremonies.