Murray Weidenbaum, President Reagan's choice to head the Council of Economic Advisers, said yesterday the reason for a large tax rate reduction program is to "provide the incentives to stimulate the economy and provide more jobs."
At his confirmation hearing before the Senate Banking Committee, Weidenbaum linked the tax cuts with spending cuts somewhat more forcefully than other administration economic officials.
"I see the compellilng need for large across-the-board tax cuts over a period of time," he testified. "It is my strong concern that these tax cuts be accompanied by a vigorous program of expenditure cuts. . . . Under 1981 conditions in the American economy, very clearly we need to do both."
Weidenbaum, an economics professor at Washington University in St. Louis and senior fellow at the American Enterprise Institute, said Reagan's economic policy package to be presented later this month will include both types of cuts along with a commitment to reduce federal regulatory burdens on business. The policy proposals, therefore, will be able to deal simultaneously with "the twin evils of high inflation and high unemployment," he asserted.
Like other administration officials, Weidenbaum is counting on the tax rate reductions and large spending cuts to convince both consumers and businessmen that the rate of inflation will be lower in the future and thus encourage both more saving and higher levels of investment.
However, Federal Reserve Chairman Paul A. Volcker yesterday told another congressional panel that inflationary expectations will not be reduced without "strong and credible policy actions and, I suspect, visible evidence for a time that inflation is, indeed, subsiding."
The Fed is due to release its targets for money growth this year on Feb. 20, two days after the president unveils his economic package of tax and spending cuts. Volcker told the Joint Economic program, which should include regulatory reform, money control and tax cuts.
Volcker said that, although the problems of putting such a program into efect were large, "I do believe we may be seeing fundamental changes in public attitudes which should make things possible now that have not been possible in the past."
Weidenbaum, acknowledging that his nomination came much later than that of other top administration economic policy makers, said he has become fully imersed in the detailed planning of the forthcoming policy package. He also note that he was a member of Reagan's economic policy coordinating committee that met shortly after the election to help Reagan chart an economic course.
The incoming CEA chairman declined to comment on the Carter administration's last economic forecast or to offer one of his own, saying a new forecast is being prepared.
On other issues, Weidenbaum said he was opposed to any intervention by the federal government in private-sector wage and pricing dicisions, that he would oppose import quotas on automobiles and that all government regulations should be subjected to a cost-benefit analysis to determine whether they should be imposed.
Asked whether he would oppose legislation introduced by Sen. John Danforth (R-Mo.) to restrict imports of Japanese autos for the next three years, Weidenbaum replied, "If presented with that issue I would give an economic response that would not be protectionist. . . . My analysis would show the effect on consumers and on our domestic inflation problem."
Ironically, Danforth and Sen. Thomas Eagleton (D/Mo.), as is customary for home state senators, introduced Weidenbaum to the committee. Both praised him highly.
Reminded that in 1972 he had supported some form of incomes policy to help curb inflation, Weidenbaum declared, "Chalk it up to live and learn. I have learned they do not work." Specifically, he said the voluntary wage and price standards used by the Carter administration and already dropped by Reagan were "counterproductive."
As for regulation, he said much of it also was counterproductive and an important reason why inflation is so high. "Government interference" in the private economy and "shortcomings in the economic policies adopted by the federal government . . . [are] the fundamental reasons for the inflation facing this nation," he said.