The verbal battle appears over, for the moment at least. In striking a somewhat conciliatory tone, chief presidential economic adviser Martin Feld-stein has yielded to the White House on the thrust of United States economic policy. It would be unfortunate, however, if Mr. Feldstein were to refrain from privately carrying his case to as many top officials as will listen.Skip to next paragraph
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Perhaps Feldstein might have gone about his campaign to reduce budget deficits through higher taxes and spending cuts with more discretion. The White House opposes tax increases. But on purely intellectual and evidentiary terms, Mr. Feldstein is nearer right. If the administration were to consider what is happening out in the American economy - with unemployment coming down and state incomes rising, both providing Washington breathing room on new expenses - it might yet be persuaded to fashion a program such as Feldstein urges.
Mr. Feldstein drew the ire of the Oval Office by arguing that the administration's huge tax cuts and expensive defense buildup are major factors behind the $200 billion annual budget deficits projected for the next several years. Feldstein argues that the deficits could eventually endanger recovery by forcing up interest rates and crowding out private borrowers in financial markets.
Mr. Feldstein is saying that changing conditions require changing policies. And change in economic policy certainly occurred during the past year, despite initial reluctance from the White House. The original administration agenda of 1981 (to cut taxes, boost defense spending, reduce nondefense spending) was challenged and then redirected somewhat by Congress in late 1982, and particularly in 1983, as the nation slipped into recession. Providing welfare and unemployment assistance - and jobs programs - became major concerns of lawmakers.
The economic upturn benefits the White House by giving it maneuvering room to focus on reducing the structural deficits. Two key areas of recovery show how.
* Jobless workers. The latest drop in the unemployment rate - down to 8.4 percent for November from 8.8 percent in October - suggests, as many economists now believe, that unemployment could reach as low as 8 percent by late next year. That, of course, translates into a huge political boost for the administration. But it also means that Washington will be able to phase out or not have to fund expensive jobs and unemployment programs costing billions of dollars.
* States. Many states will now post actual budget surpluses at the end of 1983, compared with deficits last year. According to one analyst for the Tax Foundation, that suggests that many states will eventually return some of those surpluses to citizens in restored or new services. Some 43 states will hold regular sessions next year. As the states increase their level of services, that again frees up the federal government somewhat to consider ways of trimming the deficit.
Congress also shares blame for the deficits. When the administration accepted reductions over three years - a promise that it has yet to fulfill. Congress has been as stubborn in refusing to look for meaningful ways to trim back or reduce increases in entitlement programs as the White House has been in refusing to slow the rate of increase in defense spending.
The conventional wisdom says that Congress and the White House will not be able to act on the deficit next year because of election-year pressures. Such a view need not be accepted. The national well-being needs to be asserted over campaign objectives.