Slowly but surely, large federal budget deficits are damaging the American economy, and slower economic growth in coming years could make the problems much worse, the Office of Management and Budget's top economist said today.

"It is sometimes argued that the budget deficit has done relatively little damage so far. That is not the case," declared M. Kathryn Eickhoff, OMB's associate director for economic policy.

In an address to a meeting of the National Association of Business Economists, of which she is a former president, Eickhoff said, "the budget deficit is not only the biggest fiscal-policy issue facing us today, but it lies behind most other fiscal-policy issues. Unless very large deficits are offset by higher savings, decreased investment or an influx of funds from abroad, they tend to drive the price of savings upwards via higher interest rates."

These high interest rates relative to inflation have been a major factor in increasing the value of the dollar and the U.S. trade deficit. "By some calculations, 1 1/2 million to 2 million jobs have been wiped out in the manufacturing and mining sectors because of the trade deficit," she said.

In addition, the rise in the value of the dollar "has made it very difficult for U.S. farmers to export," Eickhoff continued. Partly as a consequence, "Farm bankruptcies and farm bank failures have been growing and are expected to become a major concern over the next 12 to 18 months," she said.

In a survey released yesterday, NABE members were asked, "What policy adjustments would you suggest to assure a period of economic stability in the next five years?" More than three-fourths of the nearly 350 members who responded chose a "dramatic" reduction in budget deficits.

Echoing that sentiment, Charles E. McLure Jr. of the Hoover Institution, who helped draft the administration's tax reform plan while a deputy assistant secretary at the Treasury Department, told another session here, "The most important issue facing us is certainly not tax reform . . . It is the deficit."

The federal government should pay for what it chooses to spend through taxes rather than borrowing, McLure said. "If there is a demonstrated unwillingness to cut spending . . . we should start thinking about a . . . national sales tax or value-added tax," he declared.

Eickhoff noted that the Reagan administration's latest projections show the budget deficit falling to $18 billion in 1990. That figure is based on assumptions of additional cuts in nondefense spending, a steady 4 percent-a-year expansion of the economy, and a 4 percent inflation rate between now and 1990.

If growth and inflation averaged 3 percent a year instead of 4 percent, the 1990 deficit would be about $115 billion instead of $18 billion. "The cumulative difference over the five-year period, and the amount which must be financed in the capital markets, is huge -- $300 billion," she said.

Such a difference in expected rates of growth and inflation are well within the average range of errors economists have made in forecasts in the recent past, she said, adding that projections of such slower growth are more in line with those from a number of major private economic forecasting services.

So far, the deficit has been financed with relative ease, though at the cost of higher real interest rates, but that could change before long, she warned.

"In the decade ending in 1964, the federal deficit took, on average, 1.2 percent of available net private savings; in the following decade, the proportion rose to 9.6 percent; and in the past 10 years, it averaged nearly 50 percent," she said.

"Slowly but surely, the private sector is being squeezed out, unable to lay claim to the flow of savings. Over time, this means less capital formation and slower growth in our standard of living," she said.

Eickhoff's predecessor at OMB, J. Gregory Ballentine of deSeve Economic Associates Inc., told the NABE session that the deficits also have cut the annual accumulation of household wealth by more than half in recent years. Instead of productive wealth, households have been directly or indirectly accumulating government debt.