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Economic outlook cloudy.

Economic prognosticators speaking at the Conference Board's annual business outlook conference saw little to be optimistic about, at least in the immediate future.

Gail Fosler, chief aconomist at the Conference Board, expects economic growth to be in the range of 2% next year and the inflation rate to be about 3 1/2%.

In the months ahead, she foresees a relatively stagnant economy. "I'm looking for the economy to pick up in the second half of next year, mainly motivated by the housing sector, but that's based on getting mortage rates down to a level that brings people back to the housing market," she said.

Sluggish growth of about 2% was also predicted by Albert Wojnilower, senior adviser for First Boston Asset Management Corp. He expects interest rates to rise slightly next year.

Robert Reischauer, executive director of the Congressional Budget Office (CBO), said fiscal year 1991 brought the largest deficit in American history, despite last year's budget agreement between Congress and President Bush. He called the deficit picture "significantly bleaker now than it appeared six or nine months ago" and said estimates recently released by the CBO show the situation will continue to deteriorate over the last half of the decade.

Budget warnings also were expressed by Felix Rohatyn, senior partner of the investment firm of Lazard Freres & Co. and chairman of the Municipal Assistance Corporation for the City of New York. Rohatyn called last year's budget agreement "a reflection of the power of every possible special interest to prevent a real change in our country's addiction to borrowing for consumption instead of investment."

Rohatyn said, "The national debt will increase by 50% from its 1990 level of $3 trillion to more than $4.5 trillion in 1995. In 1980, it stood at $1 trillion; it tripled in the next decade and will quadruple in 15 years."

He added that the administration and Congress during the last decade "nearly bankrupted the richest country in the world" by cutting taxes and increasing defense spending while simultaneously failing to slow the growth of entitlement programs.

"They devastated state and local governments and the basic needs these local governments are supposed to provide," he added, and called for a national recovery program. Such an initiative would include "a vast national public investment program to meet the country's needs as well as to provide a long-term countercyclical effect to the weak economy and a reallocation of resources to assist both state and local governments," he said.

"A more active economic program will not eliminate our deficit in the very near future," Rohatyn concluded, "but our new investment, together with economic growth, will bring it down to tolerable dimensions."
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Publication:Journal of Accountancy
Date:Dec 1, 1991
Words:445
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