Via DeLong, a 2002 piece on Krugman by Nicholas Confessore

His first and last sojourn in Washington began in 1982, when Martin Feldstein, then chairman of Ronald Reagan's Council of Economic Advisers (CEA), invited Krugman, Lawrence Summers, and a few other whiz kids onto the CEA's staff. The early '80s recession and debt crisis had thrown Reagan's economic policy into disarray, and Feldstein had been brought in to fix things up. Working in government had two contradictory effects on Krugman. On the one hand, it induced in him a deep dislike for those he would later describe as "policy entrepreneurs"--activists and journalists, usually lacking academic credentials, who seemed to exert so much influence over economic decision-making in Washington. Feldstein was a pioneer of the supply side policies then in favor among Reaganites, who believed taxes were the most important determinant of economic growth. But unlike policy entrepreneurs such as Jude Wannisky and The Wall Street Journal's Robert Bartley, Feldstein refused to pretend that Reagan's massive tax cut could pay for itself. When Feldstein insisted on issuing accurate budget projections anticipating government deficits, and even called for a small tax increase to offset them, the administration's supply side purists attacked. (Treasury Secretary Donald Regan even urged reporters to "throw out" the council's annual report.) Like many economists, Krugman cherished his discipline's purity, and the sight of Feldstein being pummeled for not painting a rosier election-year picture was deeply disillusioning. "One thing you learn when you're working in an administration--not to mention at the Fed, where it's even more extreme--is to think three times before you speak and then bite your tongue," says Alan Blinder, the Princeton economist and former vice chairman of the Federal Reserve. "That's not how academics normally behave."

...

Very soon, however, Washington disappointed Krugman again. His writing and congressional testimony about income inequality brought him to the attention of Bill Clinton's campaign in 1992, which used some of his findings to attack the Bush administration. When Wannisky and other conservatives argued that skyrocketing income inequality was in fact a myth, Clinton's aides enlisted Krugman to help them fight the ensuing propaganda war. When he published a defense of Clinton's economic plan in the Times that August, it was widely assumed that Krugman would be Clinton's pick, should he win, as chairman of the Council of Economic Advisers.

Clinton did win. But his economic transition team was headed by Robert B. Reich, a Harvard lecturer, journalist, and author who had penned the early '90s other big policy tome, The Work of Nations. Not only had Reich tussled with Krugman over trade policy during the 1980s; he had also gone to Oxford with Clinton. Eventually, Reich became Secretary of Labor in the new administration, while Berkeley economist Laura D'Andrea Tyson was named chair of the CEA. Many other economists were drafted into top administration slots, including Krugman's colleague from the Reagan days, Larry Summers. But Krugman was passed over--largely, say former Clinton officials, because he was deemed too volatile. (After clashing with fellow attendees at Clinton's Little Rock economic summit, for example, he had appeared on "Larry King Live" to declare the meeting "useless.")