(FORTUNE Magazine) – In early 2003, as President Bush was preparing to take the country to war in Iraq, he was also gathering support on another front. On a crisp day in January he invited a group of the country's keenest financial minds to the White House to discuss his plan for a second round of tax cuts. A dozen eminent economists filed into the windowless Roosevelt Room next to the President's Oval Office, taking their seats around the large mahogany table. They knew the rules: No one could breathe a word of the discussion outside those four walls. As the President waited for everyone to settle down, he greeted the man at his right--short, in his mid-60s, balding and with glasses, a classic professor type. The two chatted comfortably for a few minutes. Then the President began to speak. After thanking the group for coming, he turned to his right again. "So, Marty," he said, addressing the whole room, "what do you think is going on with the economy?"

In a certain crowd--make that an elite circle--of power brokers, policy shapers, and politicos in the know, "Marty" is all it takes to identify the country's top conservative economic mind. Since George W. Bush became President, Martin Feldstein has been an economic Merlin of sorts, exerting a veiled influence on policy. "Whenever I go down to a meeting at the White House, Marty is always there sitting next to the President," says one regular participant who refused to be named for fear of not being invited back. The President has plenty of advisors to chose from--Treasury Secretary John Snow and Greg Mankiw, chairman of the Council of Economic Advisors, for instance. Still few people today, with the exception of Federal Reserve chairman Alan Greenspan, have the kind of authority that Feldstein commands.

But Greenspan's long run as economic maestro is winding down. His reign will come to an end in January 2006 when his term as a Fed board member expires--a matter we were reminded of in early May when the President officially nominated him to continue in his post. As a result, it's not too early to start speculating about who will replace him. And if Bush is reelected, Marty Feldstein is likely to prove his top choice.

Feldstein's thinking underpins the Bush administration's economic agenda, and his trademark ideas have already been incorporated into current policy. Consider the dividend tax cut that the President pushed through last year. Cutting the tax on dividends is an idea that's been around for so long no one can seem to remember who first came up with it. Well, Feldstein did--back in 1973 when he showed the negative effects of dividend taxation on investment. Feldstein also had a key role in shaping both the 2001 and the 2003 income tax cuts. And his biggest impact may lie ahead. If Bush wins reelection in November, Feldstein could help reshape the Social Security system. He has long championed the idea of privatizing Social Security accounts.

The current reverence bestowed on Feldstein is all the more remarkable when you consider his past. As the chairman of the Council of Economic Advisors during Ronald Reagan's first term as President, Marty had a very public falling out with the Republican Party after daring to argue that growing budget deficits were bad for the economy. (No, he's not worried about the current record budget deficits--but more on that later.) His position was so at odds with the Reaganites, in fact, that the President considered firing Feldstein and doing away with the CEA altogether. Any chance for a career spent shaping economic policy from inside the government seemed shot. Now, after two decades of quietly building a network that spans politics, academia, the media, corporate America, and the public sector, Feldstein is back--and back in a big way.

It's a bitterly cold February morning in Cambridge, Mass., and Feldstein is getting ready to walk over to his first class of the day. At 65, he still teaches a full course load at Harvard, where he's been a professor of economics since 1967. Feldstein tucks a printout of the day's economic data into his brown leather briefcase--a well-worn satchel that looks as if he's owned it since he first began teaching--and reaches for his coat. As he leaves his office at the National Bureau of Economic Research, which he runs, he buttons up his brown sheepskin-lined coat and puts on his matching hat. With his corporate blue pinstriped suit under wraps, he looks as though he's out for a walk in the woods.

During a brisk two-minute march over to campus--Feldstein likes to walk fast--he explains his reaction to comments by Greenspan days earlier that the government needs to explore cutting Social Security benefits to preserve the program without taking on crippling debt. "I was very surprised, very surprised," he says. Feldstein and Greenspan have known each other for years and share many of the same views. "I don't understand why he came out and said those things in an election year," he says, sounding almost exasperated. "I mean, if you're a Democrat, you can say, 'Bush wants to cut your Social Security benefits, and we won't do that. We'll preserve your benefits,' " he says, nearly out of breath.

Later that morning Feldstein heads over to Harvard's Memorial Hall to lecture 500 freshmen on Social Security. "Ec10" is Feldstein's signature class. It is Harvard's introductory course on economics, and Feldstein has taught it virtually every year for the past 40, except for the two years when he was working in Washington, D.C. He waits up on stage patiently for the students to file in. "Can we get started?" he asks, finally, and then opens with a freshman waker: "Today I'm going to talk about the most significant fiscal problem facing the United States."

For the next 50 minutes Feldstein runs through the basics of Social Security, then masterfully shifts into his criticism of the Depression-era program and finally into his plan for fixing it. His favored solution retains part of the pay-as-you-go system but adds personal retirement accounts. "I can't take you through all the arithmetic now," he says, "but believe me, it's doable."

How would the Feldstein plan work? Those over a certain age (say, 35) would continue in the current system, while younger Americans would set up personal retirement accounts that invest in stocks and bonds. The government would match employees depositing 1.5% of taxable earnings into individual private retirement accounts akin to 401(k)s. Feldstein admits that the government would have to borrow to match employee contributions, further increasing the deficit. But he argues that it would be borrowing to invest in stocks and bonds and such investment is productive for the economy.

The plan is the same one he outlined to George W. Bush when Bush was running against Al Gore in 2000. In a meeting at the governor's mansion in Austin, Feldstein gave the future President an overview very similar to his Ec10 lecture. "This is something I can sell to young people," Bush said at the time, surprising many in the room, who had expected him to follow previous Republican administrations and leave the proverbial "third rail of politics" alone. Soon after, Bush added Social Security privatization to his campaign platform.

In the current presidential race--dominated by issues of war, homeland security, and the fledgling economic recovery--Bush has yet to make Social Security reform a big issue. But if he is reelected, the prominence given to a reform program is sure to be a measure of Feldstein's persistence. For this has been the economist's most personal of crusades. It ties in broadly with his 40 years of research on taxation and government spending--a body of work that has transformed the way we think about fiscal policy.

Feldstein comes out of the classical tradition of economics epitomized by free-marketers like Milton Friedman. But his primary contribution is that he took a theory first proposed by Austrian economists --that taxation levels and government spending affect long-term economic behavior--and found proof to support it.

Before Feldstein, most economic policymaking was focused on short-term adjustments to taxes and spending to bring an economy out of recession (basic Keynesian economics). The idea that those policies shaped incentives--and that those incentives would have a measurable effect over the long term--seemed almost unimaginable to a generation who were trained to believe that human economic behavior could not be fundamentally influenced. Feldstein suspected that wasn't true. As he combed through government data sets on households and companies, he asked a simple question: Do taxes matter to the performance of the economy? "Over and over again, the answer that kept coming back to me was yes," says Feldstein, "and with very big effects." Feldstein found that tax rates set too high over a long period will discourage saving and investment. In that way Feldstein is the original supply-sider. (Supply-side economics is based on the theory that low tax rates lead to economic growth by encouraging greater saving and investment.) Over the years that position put him squarely in the middle of an increasingly heated political debate.

"I wasn't thinking about politics," says Feldstein of his early days as an academic. For that matter, he began his career without much interest in economics either. After an undergraduate degree at Harvard, he was heading to medical school there when he won a Fulbright scholarship to Oxford. Once in England, he became immersed in studying ways to fix the inefficient British hospital system. After a few years he abandoned his ambition to become a doctor and got his Ph.D. in economics. It was when he returned to Harvard as a professor in the late 1960s that Feldstein began to focus on how government policies change incentives and affect human behavior. Says Feldstein: "I wanted to get on with my research. And it just happened to appeal more to Republicans than to Democrats."

In the early 1970s Feldstein's work started to gain attention. The influential Wall Street Journal editorial page writer Jude Wanniski, an avid supply-sider, noticed a paper Feldstein had written on Social Security. "I discovered Marty," he says, only half-jokingly. "I came across a paper that a fellow at Harvard had written on Social Security, saying it was causing the national saving rate to decrease. And I thought, 'Great ... I've got to publish it.' "

Feldstein says he doesn't remember the episode. But that might have less to do with his memory and more to do with a deep reluctance to be associated with radical elements of the supply-side crowd. "I'm a true supply-sider," he says. "At the time, some of the extreme statements people were making were giving it a bad name." Feldstein is referring to what he calls a distorted belief that cutting taxes will cure all ills--deficits be damned. He believes the economy operates best when tax rates are low, but not at the expense of economic stability.

His life took a major turn in the late 1970s when he met George H.W. Bush. He joined a small group that was advising the elder Bush in his race against Reagan for the party's presidential nomination and found he enjoyed walking Bush through the economic issues of the day. It was the first time Feldstein had advised a political leader, and he was good at it. When Bush became Vice President, he recommended Feldstein for the role of CEA chairman.

Feldstein ran into trouble almost immediately. His first task as CEA chairman was to make a forecast for economic growth. At the time the economy was just starting to emerge from a recession, and the then 42-year-old political greenhorn predicted the recovery would be sluggish. He was wrong: The economy took off. Unfortunately for Feldstein, that error provided ammunition to detractors who suspected he was not a true believer in the President's "trickle down" economic policy. They derisively dubbed him "Dr. Gloom," and the name stuck.

That was only the start of what turned out to be a difficult and at times humiliating period in Feldstein's career. With fast-growing budget deficits, sky-high interest rates, and an anxious bond market, the economist found himself torn between his dream of bringing down taxes and his belief in fiscal responsibility. He advised the President to raise taxes temporarily to close the deficit. It was akin to heresy, and he enraged many in the administration.

When Feldstein didn't back down, he found himself embroiled in an ugly public brawl. Donald Regan, the Treasury Secretary at the time, frequently ridiculed him and attacked his credibility. In one episode Regan told Congress to throw away Feldstein's report, suggesting it was worthless. White House spokesman Larry Speakes dismissed Feldstein as talking "too often and too much." And Speakes even joked about plans to fire the CEA chairman. During a White House press briefing Speakes asked an aide to find out why Feldstein was lunching with the President. A note came back to him some minutes later. As he read it from the podium he mouthed the words "last supper" to the audience. The room burst into laughter.

If Feldstein felt anger, he never showed it publicly. He stuck out his two-year term and returned to Harvard in 1984. At the time even Republican allies like James Baker and David Stockman felt he had been too vocal in his criticism of the deficit and therefore of the President. Many GOP functionaries criticized him for not being a team player and for caring more about his own views than the views of the party. While Republicans were disappointed with Feldstein, however, economists and Wall Street praised his performance, seeing him as someone with integrity and courage.

Feldstein's public story might have ended there. Had he been content as an academic, he might have quietly spent the past 20 years teaching and working on his research. Instead, Feldstein used his enhanced reputation among economists and business leaders to build a vast network of contacts that still serves him today.

The key to it all was his work at the National Bureau of Economic Research. The young Harvard professor had taken control of the research group in the late 1970s, but when he returned from Washington, he threw himself into rebuilding it. The NBER had long been a place for top-notch economic research. In the first half of the century, for instance, Nobel Prize winner Simon Kuznet worked there, devising what today is our system of national economic accounting--gross domestic product, or GDP. But by the time Feldstein took over, the organization was in decline.

As the NBER grew in both size and prominence, so too did Feldstein's influence over the kind of work that economists were undertaking. He now presides over some 500 fellows who make up the preeminent economic research group in the country. To establish and maintain a reputation as a top economist today, you must publish with the NBER.

The "bureau," as he calls it, is Feldstein's home. It's where he's most comfortable and relaxed. His corner office is crammed with books--on the window sills, on shelves, everywhere. In between are also a few family photos. The most recent is of Feldstein and his wife posing with their oldest daughter, Margaret, on her wedding day. (Full disclosure: She married a former FORTUNE reporter.) On the walls are framed cartoons from the Dr. Gloom days.

Just as he's rebuilt the NBER, he has systematically and quietly forged connections in the world of business, public policy, and the media. How does Feldstein maintain his vast web of contacts? It's a combination of charm, persistence, and his BlackBerry. Wherever Feldstein goes these days, he has it with him. And he travels a lot. Most weeks he shuttles among Cambridge, New York, and Washington, if he's not jetting off to far-flung locales. While he admits it's exhausting, it's unlikely that Marty will slow down. Last year Feldstein, who has been a director of hospital services group HCA since 1998, was supposed to attend 26 company board meetings, mostly at HCA headquarters in Nashville. Could he possibly have made it to all of them? "Of course," he says, as if it never occurred to him to miss one.

Friends joke that he has only one hobby: economics. "I often get an e-mail from Marty on something to do with economics at one o'clock in the morning, and I know he's been up thinking about all this stuff," says one of his friends, Jim Poterba, an economics professor at MIT and a former student. (Two things are quickly apparent about Feldstein's friends: They're mostly both economists and former students.) They also joke about his lack of awareness on topics other than economics. One time, for instance, he scheduled a conference dinner on Super Bowl Sunday, much to the horror of the mostly male participants. Another time a friend made up lyrics to the tune of "Good Vibrations." When Feldstein drew a blank on the song, his friend explained that it was a Beach Boys hit. "Who are they?" he asked.

The line between work and play tends to be blurred around the Feldstein household. Most mornings when he's in Cambridge, he has breakfast with his wife, Kate, and conversation inevitably turns to economics. Kate has a Ph.D. in the subject and is Feldstein's most important sounding board. His wife often reads his new research and will suggest changes.

Apart from economics, the Feldsteins share a love of art. Kate is a trustee of the Museum of Fine Arts in Boston, and Marty is a serious collector of 17th-century Dutch landscapes. "They aren't historical or religious paintings," he explains, "You don't look at them and say, What's the story here? There isn't one. It's just what you see."

Feldstein has worked hard to put the controversy surrounding his CEA tenure behind him. He is careful when answering questions about his time in Washington. What would he do differently if he could go back? After a long silence he recalls his first task of forecasting economic growth. "A lot of people said I was much too pessimistic, and I didn't really believe in the supply-side miracle. Had I thought about it differently, I don't think I'd have made a different forecast--but I would have figured out how to describe it differently. My rhetoric should have been different." It's a telling comment. For a brief moment Feldstein reveals that he's conscious of managing his message--hardly a foreign technique to corporate or political leaders but decidedly less common in the economics profession.

In fact, some of his peers believe Feldstein has become too much of a political animal. "He's been very active putting out not just analytical and concrete proposals on Social Security and advising members of Congress on their proposals, but he's also put forward the kinds of proposals that the Republicans like. And packaged them in ways that politicians do, not academics," says one noted academic who refused to be named. (Few of Feldstein's colleagues will criticize him openly, no matter how delicate the criticism.)

Feldstein says he's just practical. For instance, he admits there's no appetite for a government guarantee of private Social Security accounts, so he's working on a way for the market to achieve it. "I've learned the difference between a feasible bit of policy advice and a clever idea that won't go anywhere," he says.

Then there's the record budget deficit --forecast to hit $480 billion this year. Feldstein appears unconcerned about the consequences. Indeed, the tax cuts he helped design contributed greatly to the size of the shortfall. To some it appears he has turned 180 degrees from the man who was willing to stand up to President Reagan on principle. "When I listen to him on the deficit, I feel like there's a bit of varnishing going on," says Ethan Harris, co-chief economist at Lehman Brothers and one of the few to openly challenge Feldstein's stance. "If I were in his position, I'd have been much more critical of the deficit. But I don't think there's much tolerance in the Bush administration for independently minded economists. Feldstein understands that, and he's very cautious."

Feldstein doesn't flinch at the criticism. He explains it this way: "The reason I don't sound like the Marty of 1984 is that we've got a different situation today." He says interest rates are low, and takes comfort from independent forecasters who predict that the deficit will come down as the economy grows.

Which ties in closely to his future. If the economy continues to grow strongly and Bush is reelected, Feldstein may receive his greatest acknowledgement--being named Fed chairman. Marty is the odds-on favorite to get the job. Competition might come from John Taylor, a Stanford economist currently at Treasury, where he's serving as undersecretary for international affairs. Plus, he used to work for Greenspan's consulting firm. If Greenspan has a say in his replacement, he may push for Taylor. (If John Kerry is elected, look for Citigroup's Stan Fischer, formerly a top official at the IMF, to be the smart-money favorite. It's unclear whether or not Bob Rubin, another notable Citi name, would take the job.)

But Feldstein's qualifications are first class: a top economist, strong links to the corporate sector, experience, and knowledge of how Washington works, as well as key global connections. The only other Republican who can match those credentials is already in the job. "If he were the next Greenspan, financial markets wouldn't miss a beat," says Robert Hormats, managing director at Goldman Sachs International.

Greenspan and Feldstein are actually very similar--at least in ideology. Both occupy that space in mainstream economic thinking that's slightly to the right of center. One key distinction, however, is that the current Fed chief is a product of the private sector. Greenspan established his reputation by advising CEOs like Jack Welch and created the concept of the consulting forecaster back in the 1950s. Feldstein's base has been the world of academia and the NBER.

So expect Feldstein to bring a far different style to the job. Feldstein--after years of teaching economics to freshmen--doesn't communicate as if he's some Greek oracle. In a word, he isn't "inscrutable," a term often used to describe the current Fed chairman. What's more, Marty's abiding friendships with politicians on both sides of the aisle (see box on previous page) would no doubt make him a skilled consensus builder--one of the most important assets a Fed chief can have.

And it's clear, say many of his friends, that Feldstein wants the job. That may help explain why he has been cautious in his criticism of the Bush administration, for example. So what does Feldstein say to all that? "Alan Greenspan is there--he's doing a great job," offers Marty. "Anyway, it's all way off in the future."

Good answer. That sounds like a Fed chairman in the making.