A New Guru

Reagan picks a top economist

The job has been among the most trying and thankless in the Reagan Administration. Almost from Inauguration Day, the chairman of the Council of Economic Advisers, the President's top economic policy counselor, has had to mediate between feuding factions from the Treasury Department and the Office of Management and Budget in a frustrating effort to help chart a coherent and consistent economic course. Meanwhile, he has been under pressure from the White House to produce economic forecasts that offer hope for the ultimate success of Reaganomics. When Murray Weidenbaum resigned the post three weeks ago to return to teaching, his sudden departure and disavowal of the Government's latest optimistic projections reinforced fears that the Administration's economic policy is rudderless and foundering.

Last week, however, President Reagan persuaded an economist with both stature and credibility to come on board as Weidenbaum's successor. His choice: Martin Feldstein, 42, professor of economics at Harvard University and president of the prestigious National Bureau of Economic Research in Cambridge, Mass.

Feldstein, a member of TIME'S Board of Economists, is a conservative who shares the President's conviction that excessive government spending and regulation, along with burdensome taxation, have discouraged capital formation and sapped the productive energy of U.S. business. More important, Feldstein, who earned his doctorate at Oxford University, is a respected scholar known for backing his views not with rhetoric alone, but with careful research and painstaking statistical studies as well. In 1977 he won the John Bates Clark Medal, awarded every two years to the most distinguished American economist aged 40 or under.

A reserved, balding man, Feldstein has quietly voiced strong opinions that seem to belie his gentle manner. He has argued that the food-stamp program has increased the ranks of those dependent on government aid, that Medicare and Medicaid have led to overuse of hospitals and an explosion of medical costs, and that generous Social Security benefits have undermined Americans' incentive to save for their old age. Feldstein will be an articulate ally for Budget Chief David Stockman in trying to convince Congress that the growth of these social programs should be slowed.

While Feldstein has in general staunchly supported the President's drive to reduce federal taxes, he has also expressed fears that the Administration and Congress are letting the budget deficit run out of control. On several occasions, he has suggested that the third installment of Reagan's personal income tax cut, a 10% reduction due next July, be postponed to bring the budget closer to balance. In meetings last week with Reagan's top aides, Feldstein insisted that he would stick to this position in White House deliberations, despite the President's firm opposition to any changes in his tax cut.

One of Feldstein's weaknesses is his lack of experience in economic forecasting. He has always shied away from trying to predict the short-term swings of the volatile U.S. economy. As chief economic adviser, he will face the formidable task of restoring confidence in the Government's semiannual forecasts, which have consistently underestimated the staying power of high interest rates and the severity of the current recession.

Feldstein has never hesitated to assign blame for America's economic woes. Says he: "The Government's mismanagement of monetary and fiscal policy has contributed to the instability of economic output and to the rapid rise in inflation." He now will have a chance to help change that dismal performance.

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