Murray Weidenbaum, President Reagan's former top economist, said today that the adminstration's embargo on U.S. participation in the Soviet gas pipeline is "serious backward step" in American trade policy.
In an address here, Weidenbaum, who resigned as chairman of the Council of Economic Advisers in August, listed the controversial pipeline action as one of a series of trade moves that "have led to further government intrusions into foreign trade." Another was the administration's informal limitations on Japanese auto imports.
Weidenbaum predicted that the current decline in interest rates will continue, with short term rates falling another two percentage points by early next year. But he said he expects the economy to grow by only 2 to 3 percent next year, "rather than the 4 to 5 percent forecast of the supply-side optimists . . . I believe business planning should be based on more modest expectations," he said.
Further, he suggested that unemployement is likely to stay above the nine percent mark "for some time." The recent federal unemployment report had the nation's unemployed at 10.1 percent of the national work force.
The criticism of the Soviet pipeline policy is Weidenbaum's most visible break with the Reagan administration since returning to private life. During his tenure in the White House, however, Weidenbaum was regularly pictured as an advocate of deficit-cutting measures and a loser in conflicts with top Reagan aides over key budget policy decisions.
Weidenbaum, who left the administration post to return to academic life at Washington University in St. Louis, also said at a press conference that the budget deficit picture is "truly troublesome" and predicted that without sharp changes in budget policy, the annual federal deficit would remain in the "neighborhood" of $150 billion dollars through fiscal 1985.
The high deficits, he added, do not provide "justification for tax increases. Rather, it is a strong argument for expenditure curtailment of a magnitude comparable to the 1981 tax cuts," he said, suggesting the need for major budget cutting in the next congressional session.
He emphasized that he is "convinced that there are numerous opportunities for further economies in virtually every department and agency activity-- military and civilian, urban and rural, transfer payments and direct outlays, loans and grants."
But Weidenbaum did say that the recent moves by the Federal Reserve Board to insure lower interest rates make him "more confident that 1983 will be a year of growth and progress.