Managing Economic Team Will Be a Challenge for Obama
Thursday, November 27, 2008
Barack Obama's appointment yesterday of former Federal Reserve chairman Paul A. Volcker to the growing team advising him on the nation's deepening financial crisis only heightens a central leadership challenge the president-elect will face: how to manage a stable packed with big brains and bigger personalities -- and how to make decisions when those high-powered experts disagree.
Volcker, as chairman of Obama's new Economic Recovery Advisory Board, will join New York Federal Reserve Bank President Timothy F. Geithner, who will lead the Treasury Department, and former Treasury secretary Lawrence H. Summers, who will run the White House's National Economic Council. The appointment of Volcker, who led the fight to rejuvenate the U.S. economy after the stagflation of the 1970s, is part of Obama's effort to seek "the best minds in America" to deal with the current crisis, as the president-elect put it this week.
Obama's tendency to surround himself with well-credentialed people accustomed to being in charge will also test his crisis-management skills, according to economists, historians and former White House officials. Obama, they say, must make sure that his surplus of smarts does not become too much of a good thing, as advisers leading agencies with overlapping mandates battle for the president's ear and for influence over policy.
"You wouldn't want to gather anything less than the best people you can find, even though stars have egos that are somewhat outsized and those egos might make it difficult to work together," said Peter J. Wallison, a Reagan White House counsel and now a director at the American Enterprise Institute.
But he said Obama must create clear lines of authority to avoid rattling the financial markets. "This is a management problem, and I hope Obama, who has never had an executive position, understands the confusion that will occur unless he designates a specific spokesperson," he said. "I've been in too many administrations and seen how things can get out of control."
Obama's favored approach as a senator -- bringing as many smart people as possible into the room and letting them hash out issues -- could prove less workable when urgent executive decisions must be made. The challenge could be acute, given that at least one team member, Summers, is well known for a depth of thinking matched by self-confidence in asserting his views.
The stakes could hardly be greater, as the new team faces the worst national financial mess in decades. Even slight nuances in policy statements could lead to further market turmoil. Over the past two weeks, for example, Treasury Secretary Henry M. Paulson Jr. made statements that many market players interpreted as meaning that any future bailouts would be left to the next administration. Traders began to sell off shares in some of the nation's biggest financial institutions, and Treasury officials later scrambled to clarify Paulson's remarks.
The new board -- which will include labor, business and academic voices -- is charged with providing "candid and unsparing" advice on how to jump-start the economy, Obama said. "The reality is that sometimes policymaking in Washington can become too insular," he said. "The walls of the echo chamber can sometimes keep out fresh voices and new ways of thinking."
Nevertheless, Washington insiders say that Summers is poised to dominate Obama's economic team as the head of the National Economic Council, even though the Treasury secretary traditionally has been viewed as most influential. Summers will work in the White House, with easy access to the Oval Office, whereas Geithner may have to go through more formal channels to get an audience with Obama. And any disagreements between the two could become awkward: Though Summers has served as a mentor to Geithner, Obama passed him up in favor of Geithner for Treasury.
R. Glenn Hubbard, the dean of Columbia University's Graduate School of Business and the former head of President Bush's Council of Economic Advisers, said Obama's ability to manage these relationships will be critical. "How effective a White House adviser is depends entirely on the president," he said. "The fact that Obama has been so good at choosing a lineup may suggest that he's going to be very good at managing this team."
The creation of the Economic Recovery Advisory Board means that five separate Washington entities will tackle the crisis. The four others are the Treasury Department; the National Economic Council, which coordinates policy across various agencies; the Council of Economic Advisers, a three-member internal think tank headed by economist Christina D. Romer of the University of California at Berkeley; and the Federal Reserve. Others who will figure prominently will be Austan Goolsbee, who was Obama's top economic adviser during the campaign and will sit on the Council of Economic Advisers and the new panel; Peter R. Orszag, who will be Obama's budget director; and Jason Furman, a campaign adviser who will be in the White House.
Paulson sought to avoid confusion about his role. When he accepted the Treasury post in 2006, he received assurances from Bush that he would be the lead spokesman on economic matters. Over Paulson's term, the White House hardly interfered, even when he worked with Geithner and Federal Reserve Chairman Ben S. Bernanke to craft some of the most extensive government interventions in history.