A top conservative economist, warned yesterday that a spending-limitation plan such as the one that is part of Ronald Reagan's new tax-cut proposal most likely would backfire and pave the way for more government spending.
Economists Norman B. Ture contends in a new study that the two-part proposal would bloat government spending by $15.3 billion the first year after it is enacted and by $93.3 billion at the end of five years.
The Reagan proposal would limit spending to a gradually declining percentage of the overall gross national product -- the value of the economy's output. Other conservatives have proposed similar plans.
Ture says the reason the combination would backfire is that the tax cuts Regan is proposing would spur production rapidly, pushing GNP levels up. The higher the GNP, the more spending the percentage limit would allow.
As a result, Ture says, if Congress spent as much as the Regan limit allowed, the faster the economic growth spurred by the Californian's new tax cuts would boost government outlays significantly, far beyond current projections -- the opposite of what Regan intends.
Ture estimates that if the tax cuts and a spending limit were enacted together, the government would be able to boost outlays in fiscal 1981 to $626.8 billion from the $611.5 billion now projected by the White House.
He says by fiscal 1985 spending would be able to rise to $995.9 billioin rather than the $902.6 billion now estimated by the Carter administration. And, if projections under current law increased, so would the Regan add-ons.
Ture, a consertative who favors the "supply-side" approach to economics, said he is not trying to derail the Regan tax-cut plan but merely wants to alert the governor not to couple it with a GNP-linked spending limitation.
Ture said Regan could avoid the backfire problem easily by shifting to a spending limitation formula that is not linked to the GNP -- such as holding the growth in spending to a flat 7 percent over the previous year's outlay figure.
That way spending levels would be reduced gradually each year even if the economy grew rapidly as a result of Regan's proposed tax cuts, Ture said. He estimated outlay would end up $104.7 billion below projections by fiscal 1985.
Ture's study, financed by a grant from the Heritage Foundation, marked the first major conservative criticism of the GNP-linked spending-limitation plan. Previous versions of the plan have been endorsed by most Republicans.
Regan at one time was touting the tax-cut portion of the plan by itself, but was persuaded by more traditional Republican economists to endorse the idea of proposing companion spending cuts to help dampen the impact on inflation.
Mainstream GOP economists have argued for years that cutting taxes sharply -- as Reagan's 10 percent across-the board cuts for three years would do -- would be inflationary without some offsetting reductions in spending.
The Californian repackaged his proposal last week and included the spending-limitation plan.However, he gave only sketchy details of how it would work.
Ture's calculations were based on the use of a more complex spending-limit formula drafted by the National Tax Limitation Committee, a California-based organization that was active in that state's Proposition 13 and recent Jaws II tax-cut fights.
Reagan has endorsed a simpler plan that would reduce gradually the proportion of GNP taken up by government outlays from the current 22.8 percent to 19.5 percent by fiscal 1984.
However, Ture said here this week that the same results would apply to virtually any plan that seeks to limit the growth in spending to a specific proportion of GNP.
"It can be a real trap," Ture said of the spending-limitation plan.