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.
Public Clash
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.