Outsider's view of Reaganomics: a grim forecast

For those who lift their eyes above the current federal budget battles, the years 1983 and 1984 loom as the real testing ground of Reaganomics. That outlook is fairly grim, according to many experts - if the President sticks to his present mix of controversial and sometimes contradictory economic policies.

Interest rates will be a key barometer by which to measure whether Mr. Reagan's supply-side program is working in the years that lie just ahead.

''For all practical purposes,'' says Charles L. Schultze, ''the impact of (Reagan's program) during fiscal 1981 and 1982 will be neutral, because the early tax cuts are not that big.

''The real impact,'' adds Mr. Schultze, ''will come during fiscal 1983 and 1984 and will be somewhat worse than I had thought.''

Schultze, budget director to President Johnson and chief economic adviser to President Carter, now foresees a 1984 deficit in the $110 billion to $120 billion range, up from his original estimate of $80 billion.

So huge a deficit, Schultze believes, will be harmful in two areas - inflation and interest rates, especially the latter.

''The large tax cuts of 1983-84,'' he says, ''will exert upward pressure on the economy.'' The economy, in other words, should grow - as the White House expects - because both people and corporations will have more after-tax money to spend.

Partly because the economy now is slack - 8.4 percent unemployment and factories operating at only three-fourths capacity - there may be room for the economy to absorb extra demand for goods and services without undue inflation.

So, at least, many economists, in and out of the Reagan administration, believe. ''If we are lucky,'' said Schultze, now a senior fellow at the Brookings Institution, ''we may come out of the recession with an inflation floor of 7 to 7.5 percent, instead of the present 9 percent.''

The inflation outlook will be helped, experts agree, if next year's wage contracts - negotiated in a recession year - provide for smaller increases than has been the recent rule.

By the time the November 1982 congressional elections roll around, President Reagan might be able to point to a growing economy, spurred by his tax cuts, and inflation lower than when he came into office.

This short-term political gain, however, could be dissipated by what may happen to interest rates when recovery takes hold sometime in 1982 and begins to speed up the economy.

''A large part of this upward pressure on the economy,'' says Schultze, ''will push up interest rates, if the Fed holds firm.''

Rather than risk a renewal of high inflation, in other words, the Federal Reserve Board under Paul A. Volcker might continue to curb the growth of the money supply - a policy applauded by monetarist officials on the Reagan team.

At that point, analysts warn, an expanding economy's need for more investment and loan capital could collide with the tight money policy of the Fed.

Murray Weidenbaum, chairman of the President's Council of Economic Advisers, foresees ''no clash between an expansive fiscal policy and a restrictive monetary policy, because the large tax cuts - expressed both in savings and consumer spending - should provide enough capital'' to finance the expansion.

''So interest rates,'' said Mr. Weidenbaum in a telephone interview, ''though they may climb some, will not do so enough to choke off the recovery.''

Schultze is less sanguine. ''We may get a telescoping of the (business) cycle , in which recovery - buoyed by the tax cuts - starts, but is choked off by high interest rates.

''Until we get inflation down to the point that the Fed relaxes,'' he said, ''it is hard to see how we can get continued steady recovery.''

Also putting upward pressure on interest rates will be the enormous borrowing needs of the federal government, to finance both the yawning budget deficits and so-called ''off budget'' programs.

All this forces upon President Reagan a painful decision that so far he has refused to take - sponsorship of major tax increases which, along with continued spending cuts, would begin to get government spending under control.