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Mr. Chairman, as this Committee begins its hearings on the reauthorization of public works programs, I have been asked to present the Congressional Budget Office's views on the outlook for the economy. As you know, economic growth was above trend during 1978, and unemployment declined substantially. Unfortunately, inflation accelerated to very high levels. As a result, the Administration and the Federal Reserve have undertaken an anti-inflationary program of tightened credit, wage-price guidelines, and proposed spending cuts. Their statements and actions have clearly indicated that the primary goal of their economic policies is to reduce inflation.

The economy has recently experienced relatively high rates of resource utilization, and CBO believes that additional stimulus at such rates of utilization could be quite inflationary. In fiscal year 1980, however, when your present decision will be having its effect, we are not very optimistic about the performance of the economy. In an effort to shed what light I can on this topic, I will discuss two issues in my presentation today:

• CBO's view of the short-run economic outlook; and
  
  
• The relation of the economic outlook to your decision on local public works (LPW) projects.

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