Obama left short-handed on economy
As he confronts the threat of another recession and turmoil in the financial markets, President Obama is being advised by an economic team that is noticeably short on big-name players — potentially hurting his ability to find solutions and sell them to Wall Street, Congress and the American public.
“When you ask about the economic team, it’s kind of like, ‘What economic team?’” said Edward Mills, a financial policy analyst with FBR Capital Markets. “They are very thin at a very critical time.”
The administration needs all the firepower it can muster, experts said. Yet the team is missing a key messenger in selling Obama’s policies. The post of chairman of the Council of Economic Advisors — an influential position — is vacant and is likely to remain so at least into the fall.
When Obama took office in early 2009, he was counseled by an all-star economic team that included former Treasury Secretary Lawrence H. Summers, Great Depression scholar Christina D. Romer and former Federal Reserve Chairman Paul A. Volcker.
Also on the roster were well-regarded economists such as Budget Director Peter R. Orszag, Jared Bernstein and Austan Goolsbee. All of them have since resigned.
That leaves Treasury Secretary Timothy F. Geithner as the sole remaining top member of the original team. But Geithner is a financial markets expert, not an economist. And some analysts worry that the White House might not have enough economic expertise to fashion new proposals for boosting growth.
For example, Geithner has been a strong advocate of deficit reduction at a time when most economists argue stimulating growth is a higher priority, said Dean Baker, co-director of the Center for Economic and Policy Research, a liberal-leaning think tank.
“The vast majority of economists are appalled by the idea that anyone would be talking about deficit reduction this year or next year,” Baker said. “We’re in a serious downturn. You don’t want to be cutting demand.”
Perhaps more telling, there no longer is a formal economic briefing in the Oval Office every morning, a gathering in which Summers, Romer, Geithner and other key advisors assessed the data and batted around ideas with Obama.
White House officials say Obama still is briefed almost daily on the economy and holds other meetings, such as Friday’s gathering with eight chief executives, including the heads of Wells Fargo & Co., United States Steel Corp. and Johnson & Johnson, to discuss jobs and private sector growth.
In addition, current and former administration officials say Obama’s new team includes experienced Washington veterans more suited to dealing with the difficult political challenges after Republicans gained control of the House last fall.
“The nature of the challenge has changed,” Summers said Friday. “It is less one of economic diagnosis and more one of political and policy execution, and I think you’ve got an extraordinary group of people who are just the right people for this moment in time.”
The White House said late Friday that the president has assembled an economic team “with more public policy experience in creating jobs and turning deficits into surpluses than at any time in recent history.”
Some economists and politicians said the changes are good news given the original team’s inability to find the right policies to generate a strong economic recovery. Several Republicans, including Rep. Michele Bachmann (R-Minn), a presidential candidate, even called for Geithner to resign because of Standard & Poor’s decision to downgrade the U.S. credit rating a notch.
“I think it’s important that they reboot the team,” said Kevin Hassett, an economics fellow at the American Enterprise Institute, a conservative think tank. “It frankly gives hope they might bring in a better team.”
After White House pleadings, Geithner agreed last weekend to remain in office; he had considered stepping down after the debate over raising the debt ceiling. Hassett said keeping Geithner on board was important because it avoids a long and volatile confirmation battle with Senate Republicans over his replacement.
Geithner’s influence in the White House has risen amid all the departures. He has been a key figure this week, meeting with President Obama and Federal Reserve Chairman Ben S. Bernanke. He also has been calling finance ministers and central bank officials around the world to try to contain the damage from S&P’s downgrade and the European debt crisis.
Still, the economic team lacks a top-caliber economist.
Summers, whose reputation added weight to White House policies, has been replaced as head of the National Economic Council by Gene B. Sperling, a respected veteran of the Clinton administration but not an economist by training.
Romer was succeeded by Goolsbee as head of the Council of Economic Advisors, and both often were the economic voice of the administration on television news shows. But Goolsbee stepped down a week ago to return to the University of Chicago.
Volcker is no longer head of the President’s Economic Recovery Advisory Board, a panel that last winter changed its name to the President’s Council on Jobs and Competitiveness to focus on job creation and innovation. It is now headed by General Electric Co. Chief Executive Jeffrey R. Immelt.
And lastly, Orszag has been replaced by another Clinton veteran, Jacob Lew, who also is not an economist.
Still, administration officials said there are nearly two dozen doctorate-level economists working in the White House, and the economics team operates more smoothly than it did when the prickly Summers was often at odds with Romer.
In addition, Bernstein, who stepped down this spring as Vice President Joe Biden’s economic advisor, said the situation now is different from in early 2009, when there was a need for a large government stimulus.
“In early 2009, you really wanted a Summers and a Romer in the room, the Keynesian contingent really pushing the administration toward as much stimulus as the market could bear,” Bernstein said.
With Republicans unlikely to approve any new stimulus, it’s important to have Sperling and others experienced in negotiating with Congress, he said.
But the weak economy and the president’s tough political position make it difficult to find top-notch replacements for key positions, such as chair of the Council of Economic Advisors, said Mills of FBR Capital Markets.
Obama’s economic team, he said, is “in a transition period.”