Can we really have a soft landing?

IN AUGUST 1982, I arrived in Washington to begin a year working at the White House Council of Economic Advisers. Yes, it was the Reagan administration, and I was already a liberal. But it was a technocratic position rather than a political one, and the council’s new chair, Martin Feldstein – a moderate Republican of a type that has largely vanished since – wanted some whiz kids to crunch the data. I was supposed to focus on international issues; the new hire for domestic economics was a guy named Larry Summers. Whatever happened to him?

Anyway, Marty and I had a working dinner on my arrival night, and he had one big question to ask: “Is the world economy about to collapse?”

There were two main reasons for his concern. One was that Mexico had just announced it was unable to keep paying its debts, marking the beginning of the Latin American debt crisis. The other was that the Federal Reserve’s efforts to fight inflation had sent the US economy into a tailspin, with the nation experiencing its worst recession since the 1930s, not to be rivalled until the financial crisis of 2008.