MARTIN FELDSTEIN, an economic adviser to Republican presidential candidate George Bush, was asked an awkward question: How long could Mr. Bush, if elected president, put off raising taxes to deal with the federal budget deficit? Good question, said the Harvard economics professor, who is head of the National Bureau of Economic Research (NBER). Smiling, he suggested, ``Watch my lips.'' He closed them tight.
The audience laughed, knowing that with his present partisan role, Dr. Feldstein didn't regard it as politic to give an answer. When Feldstein was chairman of President Reagan's Council of Economic Advisers, however, he fought for tax increases to remedy the deficit.
Feldstein has long argued that the United States dollar would have to fall further on the foreign-exchange markets to cure the international payments imbalance. Earlier this year, though, the dollar strengthened decidedly against the West German mark and Japanese yen. That was based, Feldstein said, on the mistaken view of foreign-exchange traders that progress in reducing the trade deficit meant the dollar problem was solved and the Group of Seven industrial nations could maintain current rates.
But in the last few weeks, the dollar has tumbled again, and Feldstein jokes, ``I can hold my head up with greater pride.'' A dollar now costs 126 yen instead of 137 yen. He figures that over the next few years the dollar must weaken to about 100 yen to restore balance.
Overall, he says, the dollar needs a real decline of 15 percent against a basket of foreign currencies, plus a drop of 10 percent or so to offset inflation, which is faster in the US than among its key trading partners. Feldstein was speaking at the NBER's annual research conference in New York.
Richard Freeman, another Harvard economics professor, reported on research by him and about 20 others in the US, Canada, and Australia on the impact of immigration and trade on the labor market.
One significant finding was that the number of illegal immigrants in the US is about 3 million today. This is far less than various guesses of 5 to 12 million published in the press. Dr. Freeman calculated the estimate with new Census Bureau statistics on the number of deaths in the US of those born in Mexico, plus births of those with parents born in Mexico. This was refined by demographic methods to obtain the total number of those of Mexican origin. Then the number of legally admitted immigrants was subtracted to give the illegal Mexican immigrants. Reckoning that Mexicans make up about 85 percent of illegal immigrants, this number was then enlarged to get the total for illegal immigrants.
Another key finding was that illegal immigrants do not depress the wages of Americans - contrary to widespread assumptions. Though 80 percent of immigrants are concentrated in six cities (New York, Chicago, Houston, Los Angeles, Miami, and San Francisco) and make up more than 6.2 percent of the total population, the study found, even the earnings of young native Hispanics and blacks with less than a high school education are not harmed.
That is not the case, however, for recent immigrants. Their earnings are depressed about 2.5 to 3 percent. Those immigrants here longer than five years aren't hurt much.
But unlike immigrants, imports can hit the wages and jobs of American workers. Some domestic producers ``got wiped out,'' Freeman said.