Economist Weidenbaum grades his former chief

As a professor, now at Washington University in St. Louis, Murray Weidenbaum likes to give grades for national economic policy.

For instance, speaking here at a briefing for the Center for International Business last week, Dr. Weidenbaum, the former chairman of President Reagan's Council of Economic Advisers, gave an ''A'' to the administration for cutting tax rates. Federal taxes as a percentage of national income have been going down since 1981 - despite the increase in some taxes voted this past summer.

But Dr. Weidenbaum gives ''Reaganomics'' an ''incomplete'' grade on a second goal, slowing down the growth rate of federal spending. The administration has made unprecedented cuts of tens of billions of dollars in outlays, but almost entirely in civilian programs. These were mainly reductions in proposed spending increases. For each dollar shaved, however, almost another dollar was added to defense spending, he noted.

In a separate conversation, Weidenbaum recalled how he and other top officials had fought with Defense Secretary Caspar Weinberger for a more modest growth path in defense outlays, but lost the battle for the backing of President Reagan.

''I'm not a dove,'' he noted, indicating his approval of a defense buildup. But he figures that the increase in defense spending is too fast and not necessary, and that it cannot be handled efficiently by American industry.

Dr. Weidenbaum regards that defense-spending mistake as a basic flaw in the administration's economic program. It has led to huge deficits in the federal budget - he estimates around $150 billion in fiscal 1983, plus off-budget borrowing. This deficit in turn reduced the financial community's confidence in the administration's economic program and thereby in some degree kept interest rates extremely high for a long time.

Dr. Weidenbaum, who has been back in St. Louis since the summer, figures Washington must still tackle the budget issue by cutting outlays on defense, such ''entitlements'' as social security or government pensions, and traditional subsidies to agriculture and business. Thus his ''incomplete'' grade.

''Reaganomics,'' with its basic objective of shifting the balance of power away form the federal government to the rest of society, has two other pillars, Weidenbaum explained.

One is curtailing the burden of regulations on business. For the first time in several decades, he noted, no new major regulatory measures were enacted or promulgated. That, like the dog that didn't bark in the well-known Sherlock Holmes mystery story, was significant, he said.

Dr. Weidenbaum figures the annual savings from the modification or rescission of burdensome regulations amount to more than $6 billion a year.

Another pillar of the Reagan program is reducing growth of the nation's money supply. Here, he noted, the administration has supported the Federal Reserve System's efforts to exercise monetary restraint.

''The Fed has in general accomplished that objective,'' he said. ''I give the Fed the credit - not just the primary credit - the credit for making progress on inflation.''

Dr. Weidenbaum charges, however, that unusual short-term volatility of the growth rates for the money supply ''may have contributed to the depth of the 1981-82 recession.''

On the other hand, he complimented the Fed on its decision to let the growth of money rise somewhat above target at the current moment, ''when the recovery is trying to get under way.''

To maintain its hard-won credibility in the fight against inflation, the Fed will have to slow down the growth of the money supply if it stays above target ''for a substantial period of time,'' he said.

Dr. Weidenbaum hinted that 10.1 percent unemployment ''is hardly an accomplishment to crow about.'' But inflation has been cut in half, from about 12 percent in 1980 to about 6 percent this year, he added.

According to Weidenbaum's ''foggy crystal ball,'' the American economy hit bottom some months ago. (Referring to the inexactitude of economic forecasting, he quipped: ''If your crystal ball is not foggy, it is not plugged in.'') Unfortunately, he said, it is turning out to be a very broad bottom.

He expects output to grow 2 or 3 percent next year - ''rather than the 4 to 5 percent forecast of the supply-side optimists.''

Dr. Weidenbaum expects consumers to lead the economy out of the recession. ''The single most positive factor is the fact that, since the beginning of the year, real personal income has been rising despite the drop in employment.''

The basic negative factor is that production has not yet started turning up because businesses have been living off inventories, he continued. But he anticipates a turnabout in production ''in the near future, initially to restock inventories.''

Interest rates, he predicts, could still trend downward on ''a very gradual path.'' But unemployment will stay above 9 percent for some time, he says.

Dr. Weidenbaum welcomes ''a new sense of realism in economic decisionmaking today.'' Dumb business decisions, he said, are no longer automatically bailed out by inflation. Consumer purchases of art, gold, and postage stamps are once again seen as consumption activities, rather than investments.

In conclusion, he recalled, and agreed with, a favorite placard seen being paraded at the White House: ''The end of the world has been postponed.''