Feldstein, Hubbard, Rubin and Summers were either unavailable or declined to comment for this article about their interest in the Fed chairmanship.
Because of the Fed chairman's enormous influence on the U.S. economy and global financial markets, the selection will be among the most far-reaching decisions to be made by the next president. Greenspan's tenure, now in its 18th year, illustrates how a successful chairman can outlast several presidents, leaving a large imprint on the nation's history.
(Ray Lustig -- The Washington Post)
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Members of both parties also are well aware of the Fed chairman's potential impact on economic policy beyond the Fed's official responsibilities. Greenspan's support helped win passage of the 1993 Clinton deficit-reduction plan, while his call for a tax cut in 2001 helped the Bush tax package sail through Congress.
"The Fed is so important," said Kevin A. Hassett, a GOP economist at the American Enterprise Institute. Any president would know "it's in his own best interest to have the best possible Fed chairman because when the economy is doing well, incumbents win."
Yet the job requires more than a dazzling economic brain. "This is a political appointment with a capital P," said Carl B. Weinberg, chief economist with High Frequency Economics, a research firm in Valhalla, N.Y. "The person who makes Fed policy will determine the reelection prospects [of the president]. . . . You'll want someone who is tested in the halls of politics and whose allegiance is unquestioned."
The Fed's chief responsibility, by law, is to achieve low inflation and maximum employment through the use of monetary policy -- essentially determining the economy's money supply by raising or lowering short-term interest rates to adjust the availability of credit.
Although it sounds arcane, good monetary policy is critical to Americans' well-being, influencing prices, the cost of borrowing and even the unemployment rate. And because the U.S. economy is the world's largest, its health affects the rest of the world.
Although the four top candidates have broad economic experience, none has focused his career on monetary policy, so it is hard to gauge their likely approach to the job. Party affiliation is not a good predictor: Fed officials of both parties are closely aligned these days in a consensus, developed over the past two decades, that the best way to foster economic growth and lower unemployment is to keep inflation very low. That buried the argument made by many economists and politicians until the late 1980s that the Fed could reduce unemployment by letting inflation creep higher.
Feldstein is one of the most influential economists in the country. He has taught at Harvard for decades and runs the National Bureau of Economic Research, which publishes working papers on economic topics. His former students include Hubbard, Summers and Fed Vice Chairman Roger W. Ferguson Jr., 52, a Democrat who is also mentioned frequently as a potential Fed chief.
Some Republicans remain wary of Feldstein because of his rocky experience as Reagan's CEA chairman, when he favored temporary tax increases to reduce the budget deficit. That was considered by some on the economic right as a betrayal at the time, and blasphemy to this day. But Feldstein has mended fences with many GOP critics over time, most recently by publicly supporting the Bush tax cuts and agreeing with the administration that the current budget deficits are less worrisome than those of the 1980s.
