Stephen Friedman, who left Wall Street to assume one of the top economic posts in the White House, will return to the private sector Dec. 31 after two quiet years in Washington, White House officials announced yesterday.
Friedman's departure as director of the National Economic Council will open a key economic policy position just as President Bush begins his ambitious push to overhaul Social Security and the tax code. Conservative interest groups and some top White House officials hope to tap a high-profile replacement from Wall Street or prominent political circles to help shepherd the president's second-term agenda.
"They need multiple people in the administration who are capable of addressing these issues," said Daniel J. Mitchell, an economist at the conservative Heritage Foundation, "because there are going to be multiple obstacles to the ideas the president has been discussing."
Friedman's departure was widely expected as the White House tries to strengthen its second-term economic team for what may be bruising battles in Congress.
"He has been an outstanding member leading the economic team the last two years," White House spokesman Claire Buchan told reporters in Crawford, Tex., where Bush is spending Thanksgiving.
N. Gregory Mankiw, chairman of the White House Council of Economic Advisers, is also expected to leave early next year.
Administration officials are sounding out Massachusetts Institute of Technology professor James Poterba -- an expert on Social Security and tax matters -- to take Mankiw's slot. They also hope to tap Stanford University's John Cogan to help push Social Security overhaul.
The White House did not announce a replacement for Friedman, but candidates are emerging. Tim Adams, a former Treasury Department chief of staff and policy director of Bush's reelection campaign, had been favored in the days after the election. Adams is seen as an effective coordinator who could bring into line separate policymaking shops at the Treasury, Commerce and Labor departments, the Council of Economic Advisers, and the Office of the U.S. Trade Representative.
But policy activists inside and outside the White House say Adams will instead be named deputy White House chief of staff. That would leave Friedman's slot open for a heavyweight who could bump heads in Congress and forcefully advocate efforts to introduce private investment accounts to Social Security and to simplify the tax code while shifting taxation from savings and investment.
"They're talking about some huge changes to economic policy in this country, and they don't have a major-leaguer to voice that every night on TV," said Stephen Moore, president of the conservative political action committee Club for Growth. "That is a big problem."
Conservatives are pushing former senator Phil Gramm (R-Tex.), publisher Steve Forbes or a top business leader, such as Fred Smith, chairman of FedEx Corp. Also under consideration is investment banker Gerald Parsky, who served on Bush's Social Security commission, and Indiana businessman Al Hubbard, a longtime friend of the Bush family.
Friedman was tapped, in part, to serve the role of heavyweight. He assumed the NEC position after a purge that took the jobs of the first NEC director, Lawrence B. Lindsey, and Treasury Secretary Paul H. O'Neill after the mid-term elections of 2002.
Friedman, a former co-chairman of Goldman Sachs Group Inc., had worked on Wall Street with former Treasury secretary Robert E. Rubin, who served as the first NEC director when President Bill Clinton created the post. Friedman was expected to bring the same credibility -- in economic and financial circles -- that Rubin brought to Clinton's White House. Indeed, tax-cutting advocates fought Friedman's appointment fiercely, fearing that a former board member of the budget watchdog Concord Coalition would hinder the president's economic agenda.
Instead, economists say, Friedman has been largely invisible. He did help calm the policy waters roiled by the feuding of Lindsey and O'Neill. But Friedman made little impression beyond the confines of the West Wing.
"He came and went like a ghost," said Bruce Bartlett, an economist with the conservative National Center for Policy Analysis.
Staff writer Mike Allen contributed to this report.
