No time to spare in cutting inflation, Burns warns

The deed must be done before too many days have passed, and it must be done with swagger, with style. If the move is meek and slow in coming it wil fail, and inflation will continue to rage unabated.

So said the expert witness to the senators. Arthur F. Burns, former chairman of the Federal Reserve Board, testified this week before the Senate Committee on the Budget, and most of his advice and suggestions were centered on one opinion -- that inflationary expectations are a key part of the problem of inflation itself.

America's most critical economic need, Dr. Burns said, is for the new administration to set in motion policies "that are not only well designed to bring down the rate of inflation, but that are widely perceived -- especially by the business and financial community -- to be well designed for that purpose."

In other words, Americans must be persuaded to look on their economic future with great expectations. Otherwise, they will not save and invest in the way America needs.

The change must affect us as quickly as an icy shower. "If it is to be done at all," Burns said, blinking calmly into the klieg lights, "it must be done boldly."

Huge federal deficits hang in front of America's economy like a stoplight, halting growth and encouraging businessmen to divert resources from productive efforts (like building factories) to speculative ones (such as trading in commodity futures), the economist said. Cutting the deficit would be his No. 1 priority.

Dr. Burns suggested four specific ways the budget might be balanced:

* Restore the president's authority to impound appropriated funds.

* Make it easier for the president to rescind particular appropriations. Currently, that can't be done unless both houses of Congress agree. Dr. Burns suggests allowing the president to reject appropriations unless both houses dism agree.

* Require Congress to propose changes in entitlement programs that would cut costs by a specified amount. The cuts would then be voted on as a package, instead of individually.

* Require that budget deficits be authorized by a two- thirds vote of Congress. For the budget to be unbalanced congressmen would have to stand up and go on the record as favoring red ink.

"What we need in this country, more than anything else, is to rebuild confidence in our economy and our government," he said.

Burns's emphasis on the symbolic content of inflation- fighting was reflected in his cautious comments on tax cuts.

"Let me be a bit romantic for a moment," he said. "If I were economic czar, I would not at this time cut taxes for individuals."

But while he wouldn't, Burns said he hoped President Reagan would. The new administration has stood stoutly behind the Kemp-roth individual tax-cut bill, and Burns said he wouldn't want the president to "zigzag."

"It's what the psychology of the country requires," he said. He added that if Kemp-Roth were combined with government spending cuts, "things could work out." But he did call for President Reagan's economic advisers to dilute the nature of the bill a bit. Kemp-Roth proposes a 10 percent cut in personal income taxes over each of the next three years. Dr. Burns would prefer that the government take a longer period for its tax slashing. That would soften any inflationary effect the cuts might have. He also recommended that Kemp- roth not be made retoractive. Instead, he maintains that it should go into effect no earlier than July 1 -- and, if possible, as late as Oct. 1.

He also counseled the senators on a budget item that is sure to draw increasing attention as the new administration shapes its economic policies -- "entitlement" programs. These programs (such as food stamps and social security) promise to help all who qualify, so it is difficult to cap their spending or even predict how much they will cost.

David A. Stockman, director of the Office of Management and the Budget, has promised to put a half nelson on entitlement program spending by tightening eligibility rules.

Burns suggested a supplementary method of cutting their cost. Calling social security recipients a "privileged class," he suggested that their checks be adjusted for inflation less "recklessly" than they are now.

He did not, however, advocate actually rolling back benefits from current levels. And he felt that current funding levels for the program should be maintained.

"To lower social security taxes at the present time I think would be unwise," he said.

The senators nodded appreciatively, as if they were students hanging on the words of a particularly respected professor. Dr. Burn's appearance before the budget committee marked the opening of what promises to be a multifaceted struggle between disparate groups to establish a new national economic policy.

Congress may bow to the administration's mandate and pass proposed economic cures relatively untouched. Or it may decide to act more traditionally and haggle over the details.

conflict is also brewing between moderate economic advisers and supply-side believers.

Dr. Burns, a respected and comparatively moderate conservative economist, counseled caution; supply-side advisers such as Rep. Jack Kemp and Mr. Stockman are holding out for more radical action.