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What does the Council of Economic Advisors do?

Marketplace Staff Sep 10, 2010
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What does the Council of Economic Advisors do?

Marketplace Staff Sep 10, 2010
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TEXT OF INTERVIEW

Kai Ryssdal: President Obama spent more than an hour with reporters this morning. It was mostly about the economy, and fairly boiler plate to boot. He wants to make it better, doesn’t understand why Republicans don’t — that kinda thing. There was a flash of news, but it went by pretty quickly. Austan Goolsbee is going to replace Christina Romer as the head of the Council of Economic Advisors. That’s great for Mr. Goolsbee and all and all, but between the CEA and the National Economic Council and the OMB and all the other cooks in the White House economic stew — who knows what each of those folks actually do?

Keith Hennessey does. He was an economic adviser to George W. Bush. So we called him to help understand who does what on economics in the White House. Good to have you with us.

Keith Hennessey:Thanks, Kai.

RYSSDAL: Seems to be me that division of economic advisors in the White House breaks down along economic policy lines and then the folks who do straight economics. Do I have that right?

HENNESSEY: That’s exactly right. The NEC traditionally coordinates economic policy.

RYSSDAL: That is the National Economic Council, right?

HENNESSEY: Right, and then the Council of Economic Advisors is the more traditional Ph.D economists who often come from academic backgrounds.

RYSSDAL: OK, so here’s the question: Why can’t you just have one person doing economics for the White House? Why do you need to break it down along policy and then the straight, dismal science part?

HENNESSEY: Well, because economic policy involves both what you see in the textbook and the practical aspects of budgeting, it involves legal constraints, and then it involves, of course in Washington, practical constraints on what you can communicate and what you can sell to Congress.

RYSSDAL: Give me an example then. And yes, you were in the Bush White House, not the Obama White House, but there are probably some parallels. Given that Austin Goolsbee is now running the Council of Economic Advisors, let’s look at the new proposal that the President rolled out this week with tax cuts and hopefully new jobs. How might that have started? Where did that come up from within the White House?

HENNESSEY: At some point, an idea is sufficiently interesting to the president that he says, I want to seriously consider this idea. And then traditionally, the head of the National Economic Council will pull together a group of the president’s advisers, including the academic economists at the Council of Economic Advisors. If it’s taxes, as it is in this case, probably the Treasury secretary, the budget director. And basically bring all those people together to analyze the different options to describe the costs and benefits. So that when you go in and you’re spending 45 or 60 or 90 minutes with the president, you’re not wasting his time. You’re instead talking about what the best policies are for the country.

RYSSDAL: We have been talking mostly about the internal White House staff: Folks who see and work with the president most every other day. But there are a whole bunch of sort of outer-ring players here that need to be mentioned: You’ve got the budget director, the secretary of commerce, the Secretary of Treasury Timothy Geithner. They all, in theory, have a vote on some of the stuff.

HENNESSEY: Absolutely. The sense that I get is that Secretary Geithner, even though he’s across a little street over in the Treasury building, is involved in just about every economic decision, and probably more of the economic decisions than you might normally expect for the Treasury Department. The budget director has his finger in absolutely everything, just because almost everything you want to do either costs money or involves regulations, and that’s the budget director’s job, and in addition, he’s got physical proximity. For the cabinet secretaries — secretary of commerce, secretary of labor, secretary of energy — a lot of it depends on how important their issues are to the president’s agenda at the moment, and also then how successful they are at interacting with the president and the senior White House advisers.

RYSSDAL: Keith Hennessey teaches at Stanford University. He’s also with the Hoover Institution up there. Keith, thanks a lot.

HENNESSEY: Thank you.

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