The head of the American Stock Exchange and the chairman of the Joint Economic Committee in Congress agreed that the country is in a recession and said they expect the Federal Reserve to further cut interest rates to help bail it out.
Interviewed on CBS's "Face the Nation," stock exchange Chairman James Jones and Rep. Lee Hamilton, D-Ind., also said Sunday that unemployment could rise to about 7 percent.Hamilton said, "Monetary policy (controlling the amount of money in circulation and the cost of borrowing) is clearly the main actor in getting us out of the recession."
But, he added, "We in Congress and the president have to do our side of it, too, and we have to keep a credible budget deficit reduction effort in place.
"We have to abide by the agreement that was struck in order that the monetary authorities can do their job and lower the interest rates, as Jim (Jones) has suggested, and which I think is clearly needed - further lowering of the interest rates," Hamilton said.
Setting interest rates is a largely a function of the Federal Reserve Board, known as the Fed.
In recent weeks, the Fed moved to cut the discount rate, the amount it charges banks to borrow money, by half a percentage point, to 6.5 percent.
Hamilton said Congress should avoid the temptation to cut taxes or boost spending, saying, "We have an (budget) agreement in place now. Let's stay with that."
Jones agreed with Hamilton and said Fed Chairman Alan Greenspan "is less worried about inflation now than he was and more worried about recession."
He said, "I would think that the Fed would continue to ease up on monetary policy and that sometime next year the effects of that would be translated into lower interest rates and more money."
Jones said the timing of the end of the recession depended in large part on when the gulf crisis is resolved but he guessed it would be the third or fourth quarter of 1991 before the signs of a recovery appear.
Jones forecast a continued slowdown in the stock market until "some certainty is established in the Middle East" and the economic situation is resolved.
On NBC's "Meet the Press," Senate Republican leader Robert Dole of Kansas said 1991 might be the time to seek a cut in the Social Security payroll tax along with an increase in what wealthier retirees are charged for part of their Medicare coverage. He also plugged a cut in the capital gains tax.
Asked whether he would lead the way on the tax question, Dole said he would "be happy to lend my effort" if a package could be put together.
He noted that Sen. Daniel Patrick Moynihan, D-N.Y., has a proposal on Social Security taxes and Medicare but 25 years from now it would result in an increases in Social Security levies so that "we have to be very careful and honest with the people who pay that tax."