Signs of a split within the Reagan administration emerged yesterday over monetary policy.
A senior budget official said yesterday he does not think money has been too tight, while other administration sources agreed with Treasury Secretary Donald T. Regan's weekend comments that the time is coming for the Federal Reserve to change policy to ensure "a sufficiency of money to enable the economy to recover nicely."
Sources said, however, that the White House did not want to urge the Federal Reserve publicly to ease its policy. White House spokesman Larry Speakes told reporters that the administration was not "retreating" from its support for monetary restraint but that money growth should be "within" the target range. At present one key money measure -- M1-B -- is growing below the Fed's target range.
However, Budget Director David Stockman pointed out in a breakfast meeting with reporters yesterday that other money measures are growing at the top of their ranges. While M1-B may grow faster in the coming months, for technical reasons, this will be neither "helpful nor a hindrance" to the economy, he said.
Stockman also suggested that interest rates may stay relatively high for some time to come before financial markets are convinced that Congress will enact the administration's policies. "In the interim, there is a possibility that interest rates will fall anyway" as a sluggish economy chokes off private credit demand, he said. He added that such a "temporary" fall "is a cyclical phenomenon that doesn't address the structural" problem of rebuilding financial confidence.
However, the budget director said he would not predict that a fall in rates in coming weeks would be followed by further rises next year if the economy recovers. Many economists believe that this may happen as a result of the very tight money policy combined with a relatively large federal deficit.
Stockman also said that if the budget deficit swells because growth was lower than forecast, which would cut tax revenues, then it would "not be wise" to offset this with more spending cuts or revenue raisers. "If the budget deficit widens due to recession, then that's clearly a cyclical phenomenon" whereas "I'm concerned about the structural" deficit, he told reporters. Most economists would agree that cyclical changes in the deficit generally should not be corrected.
Stockman maintained that he is "confident" that Congress eventually will approve the administration's proposed new spending cuts because all the other options are unpalatable.
Yesterday, however, two liberal House Democrats suggested separately that it is time for a "bipartisan" effort to "remedy the excesses" of the Reagan economic program by rolling back or deferring the scheduled 1982 and 1983 tax cuts.
Rep. Morris K. Udall (D-Ariz.), in a speech at the Women's National Democratic Club, and Rep. Richard Bolling (D-Mo.), in an interview with a group of reporters, both said that the tax package approved by Congress in August spelled mounting deficits, which can best be cured by slowing the scheduled tax cuts or repealing some newly opened "loopholes."
The administration is planning to raise a further $3 billion in tax revenues in a new tax bill for fiscal 1982. Stockman remarked yesterday that he hopes "it's a revenue-raising bill and not a large Christmas tree." He echoed other adminstration officials, saying that they would not like a repeal or delay of the tax package just enacted.
Stockman also redefined the "truly needy" who are to be pro Signs of Split Emerge Over Administration's Monetary Policy --- Signs of Split Seen --Over Monetary Policy tected from budget cuts as the "dependent poor." He said that there "never were any exemptions from spending cuts" and there was no "permanent waiver" of cuts on programs that were spared in the original budget round in February.
But he described the president's campaign promises on Social Security by saying that "current beneficiaries would not have current benefits" changed, and that the president would be "very reluctant" to tamper with the cost-of-living adjustments. A spokesman later emphasized that Social Security cuts were now ruled off limits until early 1983 when the president's suggested commission is supposed to report.