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Other Administration officials, however, brushed aside and even ridiculed Feldstein's concerns. Said Treasury Secretary Donald Regan: "I wish economists would sit back and relax. This will be one of the greatest recoveries in history." At a press briefing in November, White House Press Secretary Larry Speakes told reporters that the President and Secretary Regan "obviously don't agree" with Feldstein. He also pointedly announced that Feldstein had been excluded that day from a White House economic policy luncheon. Told that Feldstein was, in fact, present at the session, Speakes quipped, "Maybe he won't make it to dessert."
The public rebuke fueled speculation that Feldstein might be on the way out. But the President later tried to downplay the incident and insisted that there were no substantial disagreements among Administration policymakers. Nonetheless, economists like Walter Heller, who served as chairman of President Kennedy's Council of Economic Advisers, feared that Reagan was unwisely disregarding Feldstein's warnings about the need for a tax hike.
The controversy between the President and his chief economist was disturbingly reminiscent of the dispute in 1966 between President Johnson and his Council of Economic Advisers. Council Chairman Gardner Ackley argued that taxes had to be raised to pay for the Viet Nam War, but Johnson would not hear of it. He later changed his mind and signed a tax-increase bill in 1968, but the delay was a costly mistake. Many economists believe it helped unleash the inflationary spiral that U.S. policymakers have been battling ever since.
Fears of future inflation and monstrous budget deficits were not enough, however, to dispel the public mood of relief and confidence that prevailed as 1983 was drawing to a close. For many people, the most pressing concern at the moment was how to fight past the mobs crowding into shopping malls during the best Christmas season in years. The recovery was rolling, and Americans were ready to enjoy it.
—By Charles P. Alexander