Take a look at the photo above. President Bill Clinton was talking about the economy in the White House Rose Garden in 1998. Just behind him, his face partly blocked, is Larry Summers, then the deputy Treasury secretary. The woman on the right is Janet Yellen, who was the White House chief economist. On the front right edge of the photo are Jack Lew and Gene Sperling, who are key advisers helping the current president decide whether to appoint Summers, Yellen or a dark horse candidate to be the next chairman of the Federal Reserve. (Confession: The headline above isn't completely accurate, but it would be if then-assistant Treasury secretary Tim Geithner had shown up for the photo-op, along with then-Illinois state senator Barack Obama. The deftly altered version below gets closer.)
What’s the point of this, other than that men wore shockingly wide lapels in the late 1990s? There are two points: The Democratic economic policy elite has been remarkably stable over the last two decades, involving a surprisingly small number of people. And the decision over who will be the world’s most powerful economic policymaker this time next year is being made among people who have long histories together. It is the subtext of this excellent story by Zach Goldfarb on the behind-the-scenes wrangling over the Fed appointment.
On the first point, it is amazing how many of the Obama administration’s senior-most economic policymakers come from this same small clique. Sperling is literally in the same job, director of the National Economic Council, that he was in the late 1990s; Lew is now Treasury secretary but was then budget director. Jason Furman (he's not in the photo), now the chairman of the Council of Economic Advisers, was a Sperling lieutenant back then. Tim Geithner, Obama’s first Treasury secretary, was a Summers protégé.
Part of the reason is just the fact that the people most qualified to hold a senior government job are people who have previously held another government job. Being good at making economic policy and being a great economic thinker are not the same thing; plenty of excellent academic economists have come to Washington and been ineffective in policymaking roles. So if you’re the president, the safe pick is to promote someone who has proven themselves as a policymaker.
At the same time, the complete ownership that a relatively small group has held over national economic policy in the last two Democratic administrations is a remarkable thing. Sure, George W. Bush appointed economic policy people who had worked in the Reagan and George H.W. Bush administrations. But you would be hard-pressed to describe people like Glenn Hubbard or Larry Lindsey as protégés of, say, H.W. Bush Treasury chief Nicholas Brady, at least not in the way that the Obama administration officials all have a straight line back to Clinton Treasury secretary Robert Rubin. And at this point in W. Bush’s second term, his economic policy team included Al Hubbard as NEC director, Ben Bernanke as CEA chairman, and John Snow as Treasury secretary, none of whom could be classified as part of some Republican Party economic policy establishment.
So, what does that have to do with who will be the next Fed chair? Only this: The people advising the president on this decision have all known one another, and the candidates, for a very long time. Their opinions are being shaped not by any one decision the candidates made, and there is no such thing as an objective reading of the strengths and weaknesses of the people involved. Rather, for good or ill, they’re all offering assessments based on judgments formed over a lifetime.