MARTIN FELDSTEIN'S arrival at the White House gives the Reagan administration a welcome opportunity for a fresh start in economic policy. Well, perhaps not an entirely fresh start -- not in the midst of a continuing battle, from entrenched positions, over budgets and taxes. But Mr. Feldstein, a forceful intellect if ever there was one, is taking over as chairman of the president's Council of Economic Advisers at a moment when the administration badly needs a clearer sense of direction. In confirmation hearings last week, he was talking about the right things in the right tone.
His view of the world is not much different from that of his predecessor, Murray Weidenbaum, but he arrives in circumstances that are likely to give him more influence than Mr. Weidenbaum ever enjoyed. In the first euphoric days of an administration, all things seem possible, and Mr. Reagan extravagantly indulged all of the eccentric theories that had followed him into office. Those eccentric theories all had one thing in common: they assured Mr. Reagan that he could stop inflation in its tracks with no pain, no lost jobs and no recession. The present state of affairs, as Mr. Feldstein told the senators, decisively proves that wrong.
He then briskly proceeded to dump overboard the supply-side theory, as expounded in the earlier phase of this administration, and to make it clear that he was not going to waste his time defending the more extravagant monetarist claims. People at the White House must have blinked at some of those lines. But they cleared the testimony, and that's a good sign. It's another indication that they acknowledge the president's need for better economic direction than he has been getting from the Treasury. It often happens tht the appointee who arrives in the middle of a term is taken more seriously than the president's original choice. It's easier to start taking the doctor's advice if the doctor isn't the same man whose advice you have been cheerfully and publicly ignoring for 18 months.
Mr. Feldstein, like the good conservative that he is, lays heavy emphasis on savings and investment. Unfortunately, the most conspicuous drag on savings in this country is the federal deficit. In this kind of calculation, the deficit counts as negative savings, preempting resources from other kinds of investments. Mr. Feldstein worries that raising taxes to close the deficit will destroy the incentives that generate strong growth. That is likely to be the central dilemma of domestic policy for the remainder of this presidency.
Generous as always, we shall offer a paragraph of advice to the adviser: higher taxes are better than higher deficits. Americans' willingness to pay taxes is relative to the need that they see for it. There's no reason why, as a country gets richer, it should not put a larger share of its wealth into the many different public guarantees of security -- ranging from the Marine Corps to Medicare -- that people can only buy collectively.