Baptism by Political Fire

By Alexander L. Taylor Taylor Ill.

Though he's a novice, much is expected of Reagan's new adviser

To a tyro, an initiation into the ways of Washington can be harsh, as Economist Martin Feldstein has been finding out. Two months ago, Ronald Reagan nominated the highly regarded president of the National Bureau of Economic Research to become chairman of the President's Council of Economic Advisers. But at his confirmation hearings Feldstein quickly got a foretaste of what awaits him in the task of giving advice on economic policy to an Administration whose program is under attack.

Feldstein handily passed the first hurdle in the confirmation process last week, but during it, in the Banking Committee hearings that precede the Senate vote, he was badgered mercilessly by Committee Democrats eager to embarrass the President. His principal nemesis was Donald Riegle of Michigan, who hectored Feldstein about everything from his personal wealth to whether, because he didn't know the monthly cost of heating his Belmont, Mass., home, he was insensitive about the amount of money that Social Security recipients pay for utilities.

Riegle, who has a net worth of $200,000 and owns three homes, including a Michigan vacation condominium, at one point maneuvered Feldstein into admitting that his worth approached $750,000. Riegle brandished a sworn, confidential financial statement signed days earlier by the economist, which indicated that Feldstein's net worth was actually $1.2 million. In prosecuting-attorney fashion, the Senator demanded, "Do you recognize this document? Is that your signature?" Feldstein sheepishly admitted that it was. In fact, the larger figure included a calculation of pension benefits Feldstein cannot collect until age 59, and that he, understandably, did not take into account in answering Riegle's questions.

Though the testy interrogation had little if anything to do with his substantive qualifications as an economist, Feldstein, 42, took the ordeal good-naturedly. Said he afterward: "I went into the hearing room knowing that it wouldn't be a social chat. It wasn't particularly pleasant, but nothing about it was overly surprising."

Tough questions from Senators may turn out to be the least of Feldstein's challenges in his new job. With the Administration divided over the proper economic course to follow, the new chairman must naturally become actively involved in policy debates. At the same time he must not allow himself to become bogged down in interdepartmental feuding between the Treasury Department and the Office of Management and Budget. Affable Economist Murray Weidenbaum, Feldstein's predecessor in the post, cast himself in the roles of both arbitrator and peacemaker and found his influence consequently diminished. Feldstein, by contrast, plans to be every bit as forceful and direct as the other principals in the Administration's continuing economic debate.

Generally considered a free-market economist, Feldstein has criticized supply-side extremists who promised that the 1981 tax cuts would trigger sudden growth in the economy. In practical terms, he is also keenly concerned about the widening size of the federal budget deficit, and favors a cutback in Social Security cost of living increases as a way to combat it. He also suggests that federal policies have diverted too much of the nation's capital into housing, a stance that brought him opposition from the national homebuilders' lobby.

Many of the Administration's policy quarrels in coming months will focus on such complex questions as the economic impact of further budget cuts, the probable effect of additional tax increases, and even what to do about bringing the runaway growth of Social Security spending under control. In all those areas, at least, Feldstein will be right at home. At 42, the Harvard-and Oxford-trained economist is widely regarded as one of the half a dozen or so brightest and most prolific economic analysts in the U.S. In 1977 the sum total of his work, on everything from the effects of unemployment insurance on joblessness, to a much discussed study of the economic disincentives to saving contained in current Social Security law, won him the John Bates Clark Medal, a commendation that, among economists, carries almost as much prestige as the Nobel Prize.

Feldstein has already moved to bolster the influence of the CEA and reassert its in dependence from OMB and the Treasury. Even before his confirmation hearings, Feldstein was busy staking out turf for himself in the interdepartmental policy group known as T-l (for Economic Troika One), which consists of Treasury Secretary Donald Regan, Budget Director David Stockman and the chairman of the CEA. In weekly break fast meetings of the group, Feldstein has managed to hold his own in even the most esoteric of budget debates with Stockman, who possessesa daunting reputation for his deft handling of twelve-digit numbers. Feldstein's tactic: offering historical comparisons backed up with specific statistics, a device that Stockman has also used with success in policy disputes. Says Treasury Secretary Regan of the meetings: "Marty gives Dave a run for his money. If we're talking about the rates of real growth in periods following recessions, Marty has the exact figures in his head, right down to the decimal point."

Feldstein's biggest challenge will be winning the ear of the President. The backgrounds of the two men -- one a Bronx-born intellectual, the other an outdoorsy, instinctive Westerner -- could not be more different. Reagan too has strongly held opinions on economics, and some Administration policymakers have quit because they were unable to influence the President's self-taught views.

Lacking any kind of power base in Washington, Feldstein will have to make the most of his analytical skills to win le verage in the Oval Office. Said one Ad ministration official last week: "Marty is building his inside credibility very quickly." Even so, the hearing rooms of Congress and the back halls of the White House require far different talents from the classrooms and think tanks to which Feldstein is accustomed. He will have to work hard indeed to translate his considerable expertise into concrete achievements.

-- By Alexander L. Taylor Taylorill.

Reported by David Beckwith/Washington

With reporting by David Beckwith/Washington

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