With Friday’s departure of the chairman of the Council of Economic Advisers, President Obama has lost the last remaining economist on his senior economic team at a time when the recovery is weakening and the president is trying to devise a strategy to prevent additional economic turmoil.
Heading into Obama’s reelection campaign, his group of economic advisers is taking on a shape far different from the earliest days of his presidency, when Obama surrounded himself with some of the best economic and financial minds — experts on economic crises and severe downturns.
Now he has far more people on his team who are steeped in the ways of Washington budget negotiations and debates over spending and taxes.
Seeking to prevent a complete turnover on his economic team, the White House has been exerting intense pressure on Treasury Secretary Timothy F. Geithner to stay even though he has told the president he wants to step down. Austan Goolsbee, the Council of Economic Advisers chairman who has been with Obama since 2007, is returning to the University of Chicago.
Administration officials say the president has brought in members of the new team — such as Gene Sperling, director of the National Economic Council — skilled at passing economic policy in difficult economic environments. The officials pointed out that many other economists remain, including Jason Furman, a Harvard-trained economist who is Sperling’s top deputy.
Devising a strategy on the economy will be critical for the country and for the president’s political hopes. Economists are increasingly warning that the nation could slip back into recession.
The last economic crisis occurred in late 2008 during the waning months of the Bush administration, and the White House largely left the policy response in the hands of the Treasury. With Obama’s bid for a second term in the balance, the president will have to take more direct control if new economic troubles develop during the coming campaign.
Yet the president’s team also has less flexibility now as it seeks ways to boost the economy. Congress is stuck in a severe partisan gridlock, with Republicans in charge of the House. Republicans have vowed to block many of the president’s ideas for helping the economy.
“For an economic team, what really matters is do they work together to consider the full set of sound options in play and offer the wisest recommendations in light of both the economic challenges and constraints the president faces,” Sperling said.
The Obama administration could also be vulnerable because of misjudgments about the severity of the economic decline. Obama’s team underestimated how high the unemployment rate would go and then showed a great amount of optimism last year that the economy was recovering. The White House declared last summer, for instance, the “summer of recovery.” Geithner wrote in an op-ed that “we are on a path back to growth.” Vice President Biden toured the country, promoting the gains.
“It’s clear that the entire country, including the administration, has been bitterly disappointed by economic developments in the last nine months or so,” said William Galston, a former policy adviser to President Clinton and Democratic presidential candidates. “I’m sure the White House in retrospect wishes it handled last summer somewhat differently.”
Many liberal economists have criticized the president for spending too much time debating the debt and not enough time using government policy to create jobs.
Lawrence Summers, a Harvard economist, former Treasury secretary and Obama’s first director of the National Economic Council until December, subscribed to this view at a recent conference hosted by Fortune magazine.
“I think he could even focus more intensely on what is, I think, the central problem, which is how to get enough demand and enough confidence going so that this economy achieves escape velocity from the recession,” he said. “We’ve been flying out of the recession, but we’ve been flying out of it dangerously close to stall speed, and doing something about that should be our top priority.”
An Obama administration official said the president has consistently introduced initiatives to provide support for the recovery, from the stimulus bill in 2009 to the payroll tax cut and an extension of unemployment benefits in December.
That official said that those measures have helped the economy but that the president recognizes that more work needs to be done. The official said, given the depth of the financial crisis and recession, it is to be expected that the recovery wouldn’t be smooth and instead have ups and downs.
When Obama became president, he tapped economists to fill several major roles. In addition to Summers, he selected Christina Romer, an expert on the Depression, as the head of the Council of Economic Advisers.
He took the unusual step of selecting an economist, Peter Orszag, to head the Office of Management and Budget. Biden even had his own chief economist, Jared Bernstein, an expert on the working class. Geithner, while not an economist, had the rare pedigree of essentially starting his career at Treasury and was an expert on financial crises.
Now, with the exception of Geithner, all of those officials are gone.
While the senior ranks are thin on economists, the Council of Economic Advisers has some among its members, including Katharine Abraham, a specialist on employment and unemployment, and Carl Shapiro, an expert on competition.
Helping drive the president’s agenda in recent months have been Sperling and Jack Lew, the head of the Office of Management and Budget. Both experienced in politics, they are reprising roles they played in the Clinton administration as they negotiate with Congress over fiscal policy.
“The president always asks us to start with what we feel are our most ideal recommendations for the economy, but then to also rigorously examine which ones have the best chance of passing,” Sperling said.