Feldstein: Reagan knows deficit won't shrink by itself

Martin Feldstein says it would be ''a great pity'' if President Reagan does not appoint a new chairman of the Council of Economic Advisers (CEA) before the new year.

The job has been open since July, when Dr. Feldstein returned to his teaching post at Harvard University. Mr. Reagan has neither filled the CEA vacancy, nor named officially either of the two remaining members, William A. Niskansen Jr. and William Poole, as acting chairman.

In an interview here, Feldstein maintained that a respected economist as CEA chairman would force the participants in budget discussions this fall and January ''back to economic reality.''

From the conversation, it was clear that Feldstein felt a new CEA chairman might balance some of the views regarding deficits held by Treasury Secretary Donald T. Regan and some members of the White House staff. Feldstein differed publicly with Regan over the importance of the deficits and their influence on interest rates.

''By the end, we knew what we disagreed about, and we agreed to disagree on that,'' he says.

The controversial former chairman noted that in the bureaucratic process, there is always going to be a tendency for some players to increase their own influence by reducing the influence of other players. And one way to do that is to not have the other players there.

Feldstein holds that in these public disputes he was not out of line with Reagan's position. On budget deficits, for instance, he says that ''the President is a tougher antideficit man than many of those around him ... the political types.'' These people will admit that deficits are bad, but they argue against taking action immediately to lower the deficits. ''It is always, 'Not now,' '' Feldstein says.

The former-CEA chairman insists that Reagan recognizes the need for action to deal with the deficit, although the President hopes this will not include tax increases. ''He isn't imagining the deficit will just go away on its own,'' Feldstein says.

As to any claim that the deficit will disappear with growth in the economy - ''that's Don (Regan) rather than the President.''

Meanwhile, when asked about the status of the vacant CEA position, White House deputy spokesman Marlin Fitzwater described Mr. Niskansen as ''acting chairman.'' But he admitted Niskansen has not been formally given this title.

Niskansen says a ''more appropriate phrase would be 'de facto' chairman. There has been no designation.''

Mr. Fitzwater says the administration will make a decision on a new chairman soon after the election, ''if not before.'' But, he says, with the election only two months away, White House officials have chosen not to search for a chairman right away because they were too busy. The quality of the council's work has not diminished, he adds.

If Niskansen is named either acting or full chairman, it would not require Senate confirmation hearings. But if a chairman was named from outside the present council, that person's confirmation hearings would probably come up just before the election. The hearings would undoubtedly dwell on the administration's economic policies.

''I have never had any reason to expect them to name a chairman before the election,'' said Niskansen in a phone interview.

But he says he hopes that with presidential counselor Edwin Meese III and chief of staff James A. Baker III back in Washington together for the first time in some weeks, the White House can ''sort out'' the question of naming an acting chairman.

Under the Reorganization Act of 1953, Niskansen noted, only the CEA chairman has the legal authority of the council. In practice, however, he has participated in all the regular meetings in which the council normally participates - such as a Cabinet Council meeting last Thursday. He has not had the head-to-head sessions with Federal Reserve chairman Paul A. Volcker, top White House officials, or leading congressmen that CEA chairman traditionally have. But the lack of designation of an acting chairman, he admits, has not been critical to the council.

Nor has Niskansen met individually with the President. But, he notes, this was rare for Feldstein and most of his predecessors, other than Arthur F. Burns (serving President Nixon) and Alan Greenspan (President Ford). He might also have mentioned Walter Heller, who met frequently with President Kennedy.

Feldstein has given the President a ''medium-size list'' of economists he recommends for his old job. But he wouldn't name those on the list.

If a good person were available now, the President should appoint him at once , he says. But if a strong candidate is not available immediately or wants to await election results, that person should be named after the polls close. By then most of the annual economic report of the council will have been done by Niskanen and Poole.

Feldstein has no preference for an academic economist or one coming from the world of business and finance. ''It depends on the individual,'' he says, noting that the quality of economists in corporations and financial institutions has been getting ''better and better over the years.''

Feldstein says he sees the council as having a ''unique role,'' the importance on which varies somewhat with the background of other top people in an administration. Except for Secretary of State George P. Shultz, he notes, the Reagan administration has no economists in top Cabinet positions. His implication was that the views of a trained economist was especially important for this administration.

He says he saw his role as CEA chairman as one of advising the President and of explaining administration economic policy to the public, the press, or Congress. That is different from being the ''spokesman'' on economic policy.

''The spokesman announces official things,'' he notes. ''Usually the President is spokesman.''

Reagan named Secretary Regan as his economic spokesman.

Asked why Reagan didn't force his economic views on Treasury or White House officials when they went astray, Feldstein says: ''I don't know the answer to that. There is a tremendous amount of ambiguity in all this.''

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