The U.S. Chamber of Commerce's latest economic forecast calls for a deeper recession than initially expected, lasting through the first half of 1991 and pushing the unemployment rate above 7 percent by the end of next year.
The chamber, which has been extremely pessimistic about the American economy and high interest rates intended to hold inflation in check, had expected a recovery by the end of the first quarter of the new year.Richard Rahn, the organization's chief economist, warned a downturn would harm overseas economies and threaten U.S. exports, which are expected to be an island of strength in a recession as the cheaper dollar makes American goods more attractive.
"Our increased pessimism results from the imposition of higher taxes, more regulation on the economy and an acceleration of federal spending that will crowd out private investment and keep interest rates from falling," Rahn said.
"While short-term interest rates will decline slightly due to economic weakness, long-term rates will not decline substantially until the (Federal Reserve) adopts a credible and understandable long-term anti-inflation policy and Congress reduces tax impediments to savings," Rahn said.
Rahn also noted that the United States started the last decade with weak economic growth, surging inflation, higher taxes and more federal spending and regulation.