Sen. Edmund S. Muskie (D-Maine) yesterday accused White House inflation fighters of "treating public health as inflationary" in their efforts to cut back on environmental regulation.

The Senate Budget Committee chairman's charge came at the first of two days of hearings on White House intervention into regulation writing at the Environmental Protection Agency (EPA).

Meanwhile, EPA Administrator Douglas Costle appeared to distance himself from the White House in a memo rebuking economic advisers Alfred Kahn and Charles L. Schultze for trying to delay toxic water pollution rules.

Costle told Kahn and Schultze that their recent suggestion to require massive new economic analyses of the regulations is "inappropriate... counterproductive, contrary to the intent of Congress and not in the public interest."

The memo was the strongest reaction yet from the EPA chief, who in recent months has sought to accommodate White House efforts to reduce the burden of regulations on industry. Costle has been criticized by Muskie and by environmentalists for relaxing standards for acceptable levels of the urban smog under White House pressure.

Environmentalists testifying at yesterday's Environment and Public works subcommittee hearing harshly attacked the administration. Since special trade representative Robert S. Strauss identified environmental regulation as a politically attractive target a year ago, "we have seen the development of a concerted antienvironmental campaign within the White House economic staff," said Richard Ayres, an attorney for the nonprofit Natural Resources Defense Council.

Environmental Defense Fund lawyer Robert Rauch said, "What makes this particularly disturbing is that these policies are being advanced by a Democratic administration which was elected on a platform of strong environmental protection...

"Even the infamous 'Quality of Life' review developed by the Nixon administration pales by comparison to the current efforts," Rauch said, referring to the veto over EPA policy exercised by the Office of Management and Budget under Presidents Nixon and Ford.

In recent months, as inflation became a primary issue, Carter set up a White House group to review the economic impact of major regulations. White House economists have sought to relax rules dealing with strip-mining, smog, cotton dust, lead, water pollution and cancer-causing chemicals.

Schultze, Kahn and Costle are to testify today.

Muskie said the White House review has created "another bureaucracy on top of the existing bureaucracy, thus compounding the regulatory delay.... I take issue with the idea we have to have lengthy economic analysis before we can have clean air and clean water. Our standards of what is healthy are being compromised by economics."

He said that Congress has carefully considered the economics of environmental laws in lengthy debates over the last decade. "Charlie Schultze isn't telling us anything we didn't know," Muskie said. Just when we're reaching the point of getting results, Schultze and company are saying 'you should have considered the cost and we're not going ahead with these regulations.'"

While Muskie said in an interview "I'm not making any threats yet," he strongly hinted that Congress has weapons to "chill" the zeal of "antiregulators." The Council on Wage and Price Stability, which includes the regulatory review staff, has "asked to increase their personnel from 40 to over 200," Muskie said with a slight smile. As Budget Committee chairman, Muskie will have something to say about that.

He added that "it's not Schultze's business to write the laws," and criticized the White House for trying to influence regulations "off in a corner, ad hoc, without the safeguards of exposure to public opinion."

He said the White House reveiw group "has summoned regulators before it like a police court. It has a chilling effect."

Muskie's power to curb the White House appears limited, however. John Quarles, a former EPA deputy administrator under Nixon and Ford, testified yesterday that the Quality of Life Review "was the subject of intensive hearings before this committee seven years ago, and despite severe criticism by this committee, continued to function for five years thereafter until early 1977."

Quarles said he unilaterally terminated the Quality of Life Review despite OMB protests "that it was the personal request of (former director) Bert Lance that I take no action until the matter could be reviewed by him." In view of that, I should not be surprised to discover new stalks growing from the old stump."

Both Quarles and Fred Tucker, a vice president of National Steel Corp., cited support for health-related environmental rules, but said that EPA has gone too far in some instances. For example, Quarles said, one regulation under the Solid Waste Act allows only six months for industry to get disposal permits -- a job he said requires "at least 18 months."

Sens. Gary Hart (D-Colo.), John Chafee (R-R.I.) and Pete Domenici (RN.M..) joined Muskie in questioning the administration.

"It's not a question of whether we want to pay for dirty air, but of who's going to pay for it and how much," Hart said. "Opponents think the costs disappear if they repeal the regulations," he added, indicating that the costs are borne by people who suffer pollution-related illness.

Chafee cited Harris surveys showing support for more environmental regulation. "I'm not sure we've got an outraged public asking us to slow down," he said.