Directions for Fiscal Policy Research

I first started thinking seriously about fiscal policy in 1985, as a third-year graduate student at Harvard and a new research assistant for Marty Feldstein. Marty had just finished two years as chair of the president’s Council of Economic Advisers, a job in which he became fairly well known for worrying much more about budget deficits than other senior members of the Reagan administration—including being open to raising taxes in order to reduce deficits. I still recall some of the cartoons that Marty framed and hung at the NBER, and I’m sure Jim does too. One showed a rowing shell with Marty rowing in one direction while everyone else rowed in the other, and President Reagan as the coxswain yelling, “Feldstein!” Another showed President Reagan saying to Marty, “Feldstein, you tax my patience,” and Marty thinking to himself, “Hmm … hadn’t thought of that one.” So, I was trained in “deficit worry” from an early age. At the time, federal debt held by the public in the United States was equal to 35 percent of GDP.