President Reagan's chief economist predicted yesterday that passage of the smaller, later personal income tax cuts the administration is now seeking would mean less economic growth next year than the 4.2 percent increase its original tax cut would have produced.
Murray Weidenbaum, chairman of the Council of Economic Advisers, added, however, that the economy is doing better than expected this year. Thus, with a higher starting point but the slower growth rate, "I surely expect the economy to wind up in 1982 pretty much where we predicted back in February, assuming enactment of the [Reagan economic] program," he said.
At a meeting with reporters, Weidenbaum said the quarter ending this month will show "virtually no growth . . . and I see the same pattern for the third quarter." He expects a "strong upturn" in the fourth quarter of this year but only if the pending tax cut is passed by then.
The two falt quarters followed by renewed economic growth are generally in line with most private forecasts. Economists both in and out of government earlier were expecting more of a slump in the economy this year.
Nevertheless, the unemployment rate of 7.6 percent in May was only slightly below the 7.7 percent level predicted for the fourth quarter by the administration. "I expect the unemployment rate will fluctuate . . . above 7 percent and below 8 percent for the rest of the year," Weidenbaum said yesterday.
At the same time, he said inflation will be "marginally less" than the 11.1 percent increase in the consumer price index for 1981 forecast earlier this year.
Weidenbaum acknowledged that most of the improvement in the price outlook stemmed from "swing factors" such as food and energy prices that were not the direct result of administration policies. On the other hand, he maintained that gasoline and other petroleum-product prices probably are lower now than they would have been if the president had not decontrolled oil prices immediately after taking office. The CEA chairman had no hard evidence to back up his assertion, but he said freeing oil markets had added to competition and helped to lower prices.
Weidenbaum also said the Federal Reserve has been pursuing a policy that shows that it can gain control over growth of the money supply. He acknowledged that high interest rates have been a byproduct of this policy, but he said rates should fall to an average "several points" lower than their present levels later this year and during 1982. He declined to be more specific.
The administration will present an updated economic forecast along with its required midsession review of the budget about July 15.