The Other Paul Volcker
Wednesday, December 3, 2008; 12:01 AM
President-elect Barack Obama last week appointed former Federal Reserve Board chairman Paul A. Volcker to head a newly created White House economic advisory board. Volcker is widely credited with reversing the economic calamity that greeted President Ronald Reagan in 1981. He helped stamp out inflation, with a highly controversial policy of high interest rates, strengthened the Federal Reserve Board, and laid the foundation for the boom that fueled more than a decade of prosperity and growth during the 1990s.
Volcker is not just an expert in economic turnarounds, however. He is also the acknowledged elder statesman of public service reform. The son of a city manager from Teaneck, New Jersey Volcker was raised to believe that public service is a noble calling and followed through in what has been a classic "in-and-outer" career.
Volcker has spent roughly half his career in government both as a civil servant and presidential appointee at the Treasury Department and Fed, and half in the private sector as an economist and "forward planner" for Chase Manhattan Bank. Having built a resume as tall as his six-foot-seven-inch frame, Volcker became chairman of the Fed in 1979 and served until President Ronald Reagan replaced him in 1987. Who knows where the economy might be today if Reagan had kept him on instead of appointing an aggressive free marketeer named Alan Greenspan?
Throughout his career, Volcker has recognized the importance of a strong civil service. As a charter member of what he calls the "Good Government is Important Society," he has been a steadfast champion of public service. He believes that government should engage in what Alexander Hamilton described as "extensive and arduous enterprises for the public benefit" and that it must have an energetic civil service with the skills and resources for "vigor and expedition" in the faithful execution of the laws.
He also knows that Americans hate government until they need it. Speaking only months after the September 11th terrorist attacks and five years before the current economic calamity, he noted this inherent paradox in the public's view of government. "Suddenly the heroes were not investment bankers displaying their Lucite tokens of paper deals or financial engineers thinking up ever more abstruse techniques for structuring transactions," he said of the attacks. "In essence it was public servants who inspired our pride. And all of us were forced to recognize that government was not -- never could be irrelevant in a world filled with risks and hazards almost beyond imagination."
Volcker is no Pollyanna about the civil service, however. As the chairman of the 1988 National Commission on the Public Service, he led an august panel to address what was then known as the "quiet crisis" in government. Even then, Volcker and his commission could see the erosion of capacity that has led to one federal meltdown after another. But even though President George H.W. Bush embraced the commission's recommendations in a White House ceremony, its recommendations for fewer presidential appointees, a simpler, faster hiring process, and a market-based pay system languished.
Volcker was undeterred, however. With support from my Brookings Center for Public Service, he convened a second national commission on the public service in 2003. This time, Volcker was blunter. "There is a strong sense -- an overpowering sense -- that government do something about 'it's about our internal security and about our financial security," he said in convening the commission. "And at the same time, there is a lingering sense that our federal government simply hasn't been up to its job." The quiet crisis was no longer quiet, he said. It was roaring in the headlines.
But in every crisis, Volcker noted, there is an opportunity. Facing an impending deluge of civil service retirements and rising economic uncertainty, it was time to act.
It is still time to act. And Volcker's recommendations for action are still relevant. There is still good reason to reduce the number of presidential appointees and accelerate the process, as the Obama transition has already discovered as it struggles to get its transition aides cleared by the FBI. There is still good reason for market-based pay, a faster hiring process, flatter organizations, more accountability, and reorganization.
Most importantly, there is still good reason to ask the president to issue the same call to service that Volcker heard from his father. President-elect Obama clearly trusts Volcker on the economy; he can also trust him on the public service.
Paul C. Light is a professor at New York University's Robert F. Wagner School of Public Service and author of A Government Ill Executed.