President Reagan's top economist, Martin S. Feldstein, yesterday called for further deep cuts in domestic spending to bring down the federal budget deficit.
Rejecting the argument made by many economists and Democrats that Reagan's own tax cuts and planned buildup in defense spending are largely responsible for the deficit problem, Feldstein said, "the real reason for large and persistent budget deficits has been the rapid growth of non-defense spending."
The new chairman of the Council of Economic Advisers warned an audience in Boston yesterday that without "dramatic action, the United States will experience an unprecedented series of deficits during the years ahead."
Administration officials have said the president remains opposed to any change in his tax and defense programs despite Democratic gains in the congressional elections last week that will likely make it more difficult for him to win new cuts in domestic spending.
The president has to propose a fiscal 1984 budget to Congress early next year. Since the election, he has been presented very gloomy deficit projections for 1984 and later years. Many officials believe there must be further tax increases next year and cuts in defense programs to reduce the deficits, which could reach $150 to $200 billion, sources say.
Feldstein foreshadowed a battle next year between the White House and Congress over such cuts, saying "if the process of congressional decision-making is unable to revise non-defense spending in an appropriate way, our nation will become weaker both economically and militarily."
Feldstein said he neither wants "to minimize the share of defense in the national budget nor to imply that defense spending does not require careful scrutiny to find ways in which existing costs can be reduced." But he stressed that "in the perspective of the past two decades, the current and projected levels of defense outlays are not responsible for our budget deficits."
He also said "since taxes have in fact come to take an increased fraction of GNP gross national product in recent years, the high level of current deficits cannot be attributed to a reduction in taxation."
Feldstein stressed that deficits must be reduced to allow suffficient resources for private investment in the economy. "The long-term consequence of such deficits as are now projected is just not acceptable," he said, warning "the harm that such deficits could do is . . . beyond our previous experience."