Martin Feldstein, the former chairman of the Council of Economic Advisers who successfully persuaded President Ronald Reagan to cut budget deficits b
Martin Feldstein, the former chairman of the Council of Economic Advisers who successfully persuaded President Ronald Reagan to cut budget deficits by breaking his campaign promise not to raise taxes, has died. He was 79.
Feldstein died on Tuesday morning, according to his assistant, Norma McEvoy. She did not provide further details.
Nearly two years into Reagan’s first term, Feldstein became chairman of the CEA and the president’s top economic adviser at a time when the administration’s economic policies were under attack by deficit hawks.
Tax revenue was falling short of projections as inflation slowed, putting the budget in the red. Feldstein’s advice was to raise taxes — the opposite of what Reagan had promised voters in the 1980 presidential campaign.
Reagan, who was trying to increase military outlays while reducing overall government spending and taxes, sided with Feldstein over political aides. He approved revenue-raising levies on corporations, though he stuck with his promise not to raise taxes on working families.
By the end of Reagan’s second term, the federal fiscal deficit as a percentage of gross domestic product, excluding interest on the national debt, had fallen, Feldstein noted in a 2016 recollection of his two years running the CEA.
Feldstein’s impact on fiscal policy was amplified because he went public with his disagreement with other aides, a departure from the practice of people who had previously held his position.
He was also vocal on the Reagan administration’s projected growth rate for 1983. He called the estimates overly optimistic and came up with his own figure of about 3%, the number ultimately used in Reagan’s budget forecast.
Feldstein spent most of his adult life as a Harvard University professor and wrote prolifically on a variety of topics —- especially Social Security and deficits. He argued that the Social Security system discouraged private savings, and he was a driving force behind President George W. Bush’s failed attempt to privatize it.
A proponent of supply-side economics, he favored investing in capital and lowering barriers on the production of goods and services to create jobs. An advocate of “trickle-down economics,” he rejected the long-followed demand-side theories of John Maynard Keynes, which favored government spending to stimulate the economy. Keynesian policies were in retreat during much of Feldstein’s career, though they made a comeback after the 2008 financial crisis.
Feldstein was in the vanguard of using econometrics, the statistical study of economics data using computers, in public policy — winning the admiration of both conservatives and liberals. He was a regular contributor to the Wall Street Journal on economic topics with political impact.
Appointed to the Economic Recovery Advisory Board by President Barack Obama in 2009, he urged the president to remove some of the $3.8 trillion of increased deficits Obama had proposed in 2010.
“Financial markets and policy makers around the world want to see if the administration is as serious about deficit reduction as the American public,” he wrote in a Journal column that year.
In 2016, Feldstein analyzed Donald Trump’s economic plans and told Fox News that Trump “didn’t have much of an answer” when it came to how to deal with the national debt and federal budget deficits.
Last summer, he was among the economists who expressed concern that U.S. fiscal expansion when unemployment was near its lowest levels could fuel inflation and push up borrowing costs, risking a recession when Congress would have less ability to respond with fresh spending.
“We are heading to $1 trillion annual deficits and therefore $1 trillion annual borrowing,” Feldstein said then. “That will push up long-term interest rates. That could depress the equity prices that are already very much overvalued.”
Harvard and Oxford
Martin Stuart Feldstein, was born in New York City on Nov. 25, 1939, to Meyer Feldstein and Esther Gevarter. His father was a lawyer who moved the family when Martin was 11 to Rockville Centre on New York’s Long Island.
Feldstein graduated from South Side High School and earned a bachelor’s degree from Harvard in 1961, graduating summa cum laude. He went to Oxford University on a Fulbright Scholarship, where he’d planned to study health economics for a year or two before returning to Harvard for a medical degree.
But his discovery of econometrics led him to stay for six years at Oxford, where he gained his Ph.D in 1967. He then returned to Harvard, becoming a full professor in 1969. Eight years later he won the John Bates Clark Medal given every two years to the most distinguished American economist under the age of 40.
Feldstein’s career as a public official began in the 1970s. After declining President Gerald Ford’s offer of a seat on the Council of Economic Advisers in 1975, he was named president of the National Bureau of Economic Research two years later. A non-profit economic research organization, the NBER is known for independent reviews of government data.
Feldstein initially turned down Reagan’s invitation to head the CEA too, saying he had more important research work to do. But he eventually took the post in 1982.
Feldstein was a candidate to be George W. Bush’s choice for chairman of the Federal Reserve, but he lost out to Ben Bernanke. In 2006, Bush appointed him to the Foreign Intelligence Advisory Board.
In 1965, Feldstein married Kathleen Foyle, who was also an economist. They had two daughters, Margaret and Janet.
First Published: Wed, June 12 2019. 17:53 IST