Out of Control Policy Blog

The Strange Twists of Obama Economic Policy

The New York Times recently published an interesting and incisive article on economic policymaking in the Obama White House. Many won't be surprised by the personality clashes between some of the best minds in the progressive wing of the economic policymaking crowd hired by Obama. Rather, it's the character of the policymaking process that may be of the most interest.

As messy as the process has sometimes been, officials say Mr. Summers and his colleagues have worked through their differences. Often arriving and leaving in the dark, sustained by coffee and the Diet Cokes that fill Mr. Summers’s office refrigerator, they have produced in six months an array of economic rescue plans that would be daunting if spread over six years. With those, and the Fed’s efforts, the economy shows signs of new life.

Along the way, Mr. Summers has forcefully debated the Treasury secretary, his onetime protégé Timothy F. Geithner, over what to do with troubled banks. He has clashed with Peter R. Orszag, the budget director, over fiscal and health policy issues. He has collided with Austan Goolsbee, an economist on the Council of Economic Advisers, over whether to rescue Chrysler. And he and Mrs. Romer have squabbled over how best to make the economic case for overhauling health care.

His argumentative style has contributed to delaying some actions, officials say, like the Treasury-led overhaul of the bank bailout program that was inherited from the Bush administration and an overhaul of the financial regulatory system, which is now expected later this month.

The disagreements are only natural, White House officials say. The issues are big, and so are the personalities, as Mr. Obama intended. He has said he wanted advisers who would be teammates as well as rivals, long on experience and brainpower and able to air all sides of an issue to help him decide.

Obama's hands-on approach to policymaking is quite evident in the real of economic policy. The economic team isn't making the big decisions. They debate, and come up with a recommendations, but at the end of the day the President weighs the information and makes the decision.

Take this example on Obama's decision on whether the federal government should let Chrysler fail:

"Mr. Goolsbee and Mr. Summers also clashed in March over whether to bail out Chrysler and ease its merger with Fiat, or to let the automaker fail.

Mr. Summers, along with Mr. Geithner and the political advisers, favored giving Chrysler a second chance. “My judgment, and Tim’s judgment, was that given all the equities involved, and given the potentially traumatic effects on confidence, that it was much better to try to save Chrysler if a reasonable merger agreement could be reached,” he said.

Mr. Goolsbee argued that rescuing the financial system was one thing, since credit is the economy’s lifeblood, but the government should not run an auto company. Saving Chrysler, he added, could further harm General Motors, which stood to gain market share.

The arguments became so heated that Mr. Summers stormed from one meeting, a witness said. While he later included Mr. Goolsbee’s objections in a memorandum for Mr. Obama, he excluded Mr. Goolsbee from the decisive meeting with the president.

There, Mrs. Romer expressed the objections from the Council of Economic Advisers, but made a point of naming the absent Mr. Goolsbee. That prompted Mr. Obama to ask, “Where is Austan?” He had the aide summoned to state his case, in what some aides took as a rebuke to Mr. Summers. The discussion continued that evening, and Mr. Obama decided on the course Mr. Summers supported."

Summers doesn't always get his way. He (and Geithner) lost the argument with Obama on executive pay limits, for example.

This article does a great job of characterizing the style of presidential decisionmaking. For the most part, I'm not surprised; this seems to comport with the personality we saw during the presidential campaign as well as his style of campaiging in pre-presidential races (from what I"ve read).

Of course, the troubling part of this brand of decisionmaking is that there are only 24 hours in a day and the president is not necessarily an expert even after a briefing from really smart people. Many more issues may deserve or need the same level of attention from the White House, but they can't get the visibility or the support they need because of the highly centralized nature of the policymaking in the White House, and they can't get the interest of the President.

Samuel Staley is Research Fellow


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