Reagan sidesteps Feldstein in backing jobs program
With unemployment above 10 percent, Washington feels a great political need to be seen as doing something to provide jobs.
President Reagan decided Tuesday to go along with the pressure, endorsing a 5 -cent-a-gallon raise in the gasoline tax to help pay for repairs of the nation's highways and bridges and to assist urban mass-transit systems.
Only the day before, in an interview, Dr. Feldstein spoke of the drive for the jobs program as ''natural clamor.''
The chairman of the Council of Economic Advisers has been stating his opposition to the various proposed job-creating programs forcefully. ''I don't think we want to go with the kind of public-works program I hear people talking about on the Hill,'' he said.
He opposes the $5.5 billion program for two reasons:
1. The administration, Congress, and the Federal Reserve System have already instituted policy changes to bring about a recovery.
2. The program could actually increase the number of jobless for a year or so.
Dr. Feldstein's expectation of recovery, perhaps by year-end, is based on the boost in incomes resulting from last summer's 10 percent cut in personal income taxes, the decline in inflation, and the drop in interest rates. On Monday major banks trimmed their prime rate - the interest they claim to charge their most creditworthy customers - half a percentage point, to 11.5 percent.
The former president of the National Bureau of Economic Research explained that as inflation has come down, the real growth of M-2 - a measure of the nation's money supply that includes currency in circulation, private checkable deposits, savings deposits, and money market funds designed for individual investors - has become positive. Real growth is measured after subtracting the inflation rate. When this was done in early 1981, the real growth rate was negative.