The chairman of the president's Council of Economic Advisers yesterday gave the clearest indication to date that the Reagan administration will have to trim the once-inviolate military budget to keep 1982's federal deficit from growing.
Murray L. Weidenbaum, the council's chairman, speaking on "Meet the Press" (NBC, WRC), said defense spending authority has grown 55 percent between fiscal year 1980 and fiscal year 1982, which begins Oct. 1. Calling that growth "extremely generous," Weidenbaum suggested a less rapid expansion might be in order.
"There are no doves in Ronald Reagan's administration," Weidenbaum said, but there is a "serious question" of whether the Pentagon can absorb efficiently great amounts of new funding.
Meanwhile, Federal Reserve Board Chairman Paul A. Volcker said there is "no question" the nation's central bank plans to maintain the tight controls on money and credit availability that have kept interest rates at near-record levels for months. The high cost of borrowing is a major reason for increasingly pessimistic forecasts about the 1982 deficit.
Volcker, speaking on "Issues and Answers" (ABC, WJLA), said the Fed's tight-money policies have reduced the growth of the money supply and resulted in a lessening of inflation this year. "We're a long way from home, but they are hopeful signs," Volcker said.
He agreed that using monetary policy alone to fight inflation is uncomfortable and said the administration needs to find more budget cuts to take some pressure off monetary policy in the effort to curb inflation.
"We still have a $700 billion budget. There's a lot of room for cutting. I find it hard to believe there is no room for economies in the defense program," Volcker said.
Weidenbaum conceded he doesn't have a specific plan to cut military spending, but he said that nothing is sacrosanct in the budget and defense spending should be "subject to the same tough" standards as any other budget item.
Although Weidenbaum stopped short of guaranteeing a cut in the Pentagon budget, it was the stongest public statement to date by an administration official that future attempts to hold down the federal budget deficit will have to come out of the military as well as civilian and social programs.
Privately, however, officials have conceded that the $750 billion tax cut passed last month will result in budget deficits higher than the administration wants and that if President Reagan is to keep his fiscal 1982 deficit to the $42.5 billion he promised, Pentagon spending will have to be trimmed. The Congressional Budget Office projects a $60 billion deficit under current conditions.
Fears of a sharply higher deficit have sent stock and bond prices plunging in recent weeks.
Weidenbaum, however, likened the administration to the cleanup crew after a late-night party and said positive effects of the Reagan policy already are evident. While the New York markets may be plunging, the world is giving the United States a vote of confidence. The dollar has been climbing in value in the past six months. " 'Sound as a dollar' is an accurate statement once again," Weidenbaum said.
Weidenbaum's predecessor among Carter economic advisers, Charles L. Schultze, said the economy would be better off if the Reagan administration trimmed some defense dollars to enable the Federal Reserve to ease up on money policy. But Schultze, on "Face the Nation" (CBS, WDVM), added that no matter what the administration does, inflation cannot be eliminated without tight monetary policies.
Weidenbaum denied that there is any serious clash between the administration and the Federal Reserve Board over the Fed's hold on the nation's money supply. Administration officials have said publicly in the past few days that they are concerned that high interest rates might drown the economy.