Obama's Economic Team

Noam Scheiber, via Tyler Cowen and Greg Mankiw:

Like Bill Clinton in 1992, Obama's campaign boasts a cadre of credentialed achievers. Intellectually, however, the Obamanauts couldn't be more different. Clinton delighted in surrounding himself with big-think public intellectuals--like economics commentator Robert Reich and political philosopher Bill Galston. You'd be hard-pressed to find a political philosopher in Obama's inner wonk-dom. His is dominated by a group of first-rate economists, beginning with Goolsbee, one of the profession's most respected tax experts. A Harvard economist named Jeff Liebman has been influential in helping Obama think through budget and retirement issues; another, David Cutler, helped shape his views on health care. Goolsbee, in particular, is an almost unprecedented figure in Democratic politics: an academic economist with a top campaign position and the candidate's ear.

Offhand, the Goolsbee situation doesn't sound wildly dissimilar from Clinton administration figures like Lawrence Summers, though those guys weren't necessarily with the campaign from day one.

Comments

Re " You'd be hard-pressed to find a political philosopher in Obama's inner wonk-dom."
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That's because Obama's political philosopher is Jesus.

To my knowledge, the only political philosopher who ever grabbed a whip and beat the living shit out of a bunch of bankers.

Which --if this subprime mess continues -- might be a political philosophy making a comeback.

Posted by Don Williams | February 27, 2008 9:21 AM

Yeah, Summers is a little reminiscent of Goolsbee, but I'd say he's probably smarter (obviously both guys are really smart) and much less creative.

But you're right that Summers doesn't apply because he's talking about 1992, and Summers came in much later.

For more on Clinton's public intellectuals I recommend Paul Krugman's old book "Peddling Prosperity," which really puts his guys in a bad light.

Posted by Cliff Mason | February 27, 2008 9:24 AM

If this distinction is correct, I'd say it is the legacy of Obama's time at the University of Chicago Law School. The whole framework of discussion at Chicago is built around the assumption that economics is the basis to analyze nearly any legal or policy issue.

Posted by David A | February 27, 2008 9:38 AM

Summers didn't come much later; he started at the Treasury Department at the beginning of the Clinton Administration. Don't know if he was with Clinton all through the primary season, though.

I think articles like this exaggerate the differences. Every Democratic campaign is going to have its slightly left of center economists, just like every Republican campaign is going to have its slightly right of center folks. Is Goulsbee any more influential with Obama than Kevin Hasset is with McCain? I doubt it.

Posted by Dave | February 27, 2008 9:45 AM

I don't buy the idea that the ideology of team members suggests how an administration will behave. Colin Powell didn't shape much of the foreign policy as Bush's Secretary of State. Robert Reich didn't shape much of Clinton's Secretary of Labor.

Posted by joejoejoe | February 27, 2008 9:48 AM

Summers was never in the White House.

Posted by Anony | February 27, 2008 10:07 AM

The question is whether Goolsbee (a Graduate Business School economist....NOT in the pure economics department) IS left of center. I have heard the contrary, but haven't read his stuff so can't say personally. I'm told that the Harvard retirement guy also sounds a little right wing.

They are the difference between full health care coverage (which requires mandates, without any doubt) and partial health care coverage that Barack claims to favor. I assume they are the reason that Barack mouths right wing talking points like Social Security is a huge problem and we're going tohave to have a grand conference and grand bargain to fix it. (In fact, it is a small problem, and a little tinkering will fix it fine. Medicare is a different situation, but, once again, solving health care for everyone will also solve health care for the over 65 folks. It is all connected.)

In fact, it is economic things like these that convinced me that Hillary would be a better president than Barack. but Matt....you're so in love with him that little things like right wing oriented health care and social security fixes don't seem to bother you. There really is more to a candidate, and to an electoral decision, than inspiration.

Posted by Barry | February 27, 2008 10:10 AM

I don't buy the idea that the ideology of team members suggests how an administration will behave. Colin Powell didn't shape much of the foreign policy as Bush's Secretary of State. Robert Reich didn't shape much of Clinton's Secretary of Labor.

The flip side of this is that Dick Cheney, Karl Rove, and Donald Rumsfeld collectively had more to say about what happened in the Bush administration than George Bush did...

Posted by J.B. | February 27, 2008 10:15 AM

Barry,

Mandates was an idea invented in the '70s by the rightwing.

Posted by Micheline | February 27, 2008 10:33 AM

Matt,

You've actually missed the heart of the story (at least from an econ geek's perspective), which is that Goolsbee is regularly consulting with Richard Thaler. That tells you which strain of Chicago economics Goolsbee is coming from. Not surprisingly, that is the same strain that is associated with law professor Cass Sunstein, a prominent Obama supporter, who is coming out with a book co-authored with Thaler.

By the way, the fact that Obama and Goolsbee go way back as a result of their Chicago connection suggests that this is indeed not a case where Goolsbee was brought on specifically because of his credentials, but rather because Obama likes his advice and ideas. Of course, the Robert Reich analogy may be a fair one: the Clintons went way back with Reich as well, but basically ditched his ideas in favor of Dick Morris' after the 1994 mid-term elections. But obviously, that doesn't suggest the same will happen with Obama and Goolsbee--rather, it just points out the truism that there is no guarantee a politician will keep following your advice.

Posted by DTM | February 27, 2008 10:45 AM

Barry,

The Chicago "school" of economics is historically conservative in political terms. I don't think, though, that it is useful to think of Austin Goolsbee in those terms. Like most serious academic economists, he is guided not analysis, not ideology.

He is, like Cutler and Liebman, one of the most thoughtful and knowledgeable economists around. I think it speaks quite positively for Obama that he has decided to associate so closely with analysis-driven experts like Goolsbee, Liebman, and Cutler.

Obviously, we cannot know how closely Obama would listen to these experts when formulating economic and social policies; however, the opportunity cost of their time is sufficiently high and their inherent interest in politics is sufficiently low that it seems safe to conclude that each would only take time away from their research if they believed that their advice would have a substantial influence in guiding Obama administration policy.

Posted by Jeff | February 27, 2008 10:46 AM

And I'm sure it's just a coincidence that Obama is also using as his health care adviser the same guy who so successfully led the fight against Clinton's original health care plan on behalf of insurance interests.

But Obama's more than a political candidate - he's Clark Kent, to burst out of the phone booth after the election as Super Progressive, and these advisers are simply protective camouflage to draw in unsuspecting conservatives!

Uh huh. This guy is sending the exact same kind of signals Bush did before his election, and yet the educated pundit class remains oblivious. Funny, that.

Posted by Susie from Philly | February 27, 2008 10:49 AM

"If this distinction is correct, I'd say it is the legacy of Obama's time at the University of Chicago Law School. The whole framework of discussion at Chicago is built around the assumption that economics is the basis to analyze nearly any legal or policy issue."

This is a bit of an overstatement. While Chicago is the birthplace of the "Law and Economics" movement, it is hardly held out as THE basis to analyze nearly any legal or policy issue. Yes, there are some hardcore L&E guys there (Epstein, Levmore, Fischel, Posner, Easterbrook). But there are just as many who aren't -- Strauss, Stone, Sunstein (yes, I know he dabbled in behavioral economics in the recent past, but (1) that's not really the same thing and (2) it's really not his concentration).

At least when I was there, L&E was taught as one approach to analyzing particular legal matters -- something that was very helpful in some fields (contract law, tort law to a lesser degree, corporate organizational theory), but not so much in others (constitutional law being the biggest example).

Posted by Joe '01 | February 27, 2008 11:00 AM

Oh, and it's the GSB, not the GBS. And there really isn't a distinction between econ professors at the GSB and those across the midway. Tell Gary Becker that he's less of an economist because of his office location.

Posted by Joe | February 27, 2008 11:04 AM

Just to make something more explicit: the study of economics at Chicago is not monolithic.

To be sure, there is something called the "Chicago School" in economics, which is primarily associated with mid-20th-century people like Milton Friedman, George Stigler, and Friedrich Hayek. The Chicago School is typically associated with political conservatism because it basically makes the case for free-market libertarianism (although I think recent developments are causing some people to question whether there really is a strong connection between contemporary American political conservatism and free-market libertarianism).

But lots of other sorts of economists have worked at Chicago. Specifically, Richard Thaler comes from the behavioralist strain of contemporary economics, and actually represents an entirely new generation of economists who came after the Chicago School economists.

I think there is actually a lot of confusion about what political valence should be associated with these behavioralists. On the one hand, the behavioralists are undermining the theoretical arguments made by the free-market libertarians by basically documenting the many ways in which the behavior of people does not fit the assumptions of their models. On the other hand, the behavioralists are also providing ammunition to the public choice theorists who are documenting all sorts of problems with the functioning of public institutions.

What you tend to get out of all this is the sentiment that you do need the government to be involved in the economy in various ways, but you also need to be very cautious about that involvement, and very smart about how you structure government programs and institutions in order to make sure that they come reasonably close to fulfilling their intended aims. That doesn't fit neatly into the "liberals like big government and conservatives like small government" dynamic of the mid-late-20th century. On the other hand, as I noted above, increasingly that proposition is looking like a less and less accurate description of contemporary American politics anyway.

Posted by DTM | February 27, 2008 11:09 AM

"Uh huh. This guy is sending the exact same kind of signals Bush did before his election, and yet the educated pundit class remains oblivious. Funny, that."

Precisely what signals are those? That he has advisors?

Posted by Joe | February 27, 2008 11:11 AM

Hayek, technically, should be associated with Austrian economics. His appointment was in the Committee on Social Thought.

Posted by chichi | February 27, 2008 11:20 AM

If you look historically at when Presidents have been able to accomplish anything at all domestically, it is almost always when a strong majority elects the president and a same party legislature at the same time. During this phase, if there is perceived to be a strong mandate, legislation gets passed quickly. The the dissension, backbiting, political self-interest and general muck sets in, and domestic policy becomes impossible.

The only exception is when for some reason there is a strong national perception of an emergency, as after the assassination of JFK. And in that case the new President was a legislative genius.

The most likely chance for a President to have any domestic accomplishments is for the legislature to believe that the President is supported by an overwhelming public consensus. In that sense, Obama's politics of inspiration is quite interesting because it has the chance of being an effective strategy.

Posted by Sherry | February 27, 2008 11:23 AM

chichi,

Hayek fortunately has enough historical influence to spread around. He obviously did come out of the Austria, then joined the LSE and became a British citizen in the 1930s, then came to Chicago in 1950. You are correct the Economics Department at the time wouldn't accept him--the person typically blamed is Frank Knight, who interestingly enough is one of the grandfathers of the behavioralist approach. But in any event, that didn't stop Friedman et al from working with Hayek. Finally, I think it is fair to say his interests had moved on by that time more to political and social philosophy than pure economics, but I also think it is fair to say the economic agenda of Friedman et al was connected with Hayek's political/social agenda.

Sherry,

Incidentally, LBJ may deserve the title of legislative genius, but it also happens to be the case that in the 1964 election, as LBJ was cleaning up against Goldwater, the Democrats were adding a net of 36 seats in the House and 2 seats in the Senate, getting them over 2/3s in each house. Of course that only supports your general point, and even with respect to LBJ's "genius," it turned out to be true that he needed to put together a coalition with some Republicans to get things like the civil rights legislation passed.

Posted by DTM | February 27, 2008 11:52 AM

"I assume they are the reason that Barack mouths right wing talking points like Social Security is a huge problem and we're going tohave to have a grand conference and grand bargain to fix it. (In fact, it is a small problem...."

No. Its a massive problem. And its a very easy to understand problem so I am not sure why you can't understand it. But let me explain it very simply: 14 and 2. When Social Security was started 14 workers supported 1 retiree whereas due to demographic trends it is essentially a certainty that in the future only 2 workers will pay the pension of one retiree. Its doesn't take any fancy math to realize that there is a problem.

So how do you solve the problem: you somehow generate a gargantuan surplus which the federal government is not allowed to touch. I strongly doubt the federal government would be able to avoid touching this surplus. BTW, the size of the current social security surplus is zero (I don't count government IOUs as part of the surplus).

Of course there is one country that did solve this problem. Canada. They did this by creating the CPPIB which is independent from government and will in the future be in of charge of managing the Canadian Pension Plan (it is currently managing part of it). The result is that the federal government cannot touch the funds CPPIB controls which I believe is the greatest thing about it (although there are many other benefits of having the CPPIB).

Posted by assman | February 27, 2008 12:05 PM

Well from a progressive standpoint it is a little alarming that George Will looks on Goolsbee with fond approval.
The Democratic Economist I know alarm bells went off in my head when I saw the following

Is Goolsbee dismayed about widening income inequality? Yes, but with a nuanced understanding. The stagnation of middle- and working-class incomes, and the anxiety that has generated, is, he says, a most pressing problem, but policymakers must be mindful about trying to address its root cause, which Goolsbee says is "radically increased returns to skill."

Because everyone knows hedge fund managers are 1000x smarter than the typical CEO who is in turn 400x more skilled than the average line worker. Yep you can explain every bit of the growth in income inequality since 1980 as the skill premium. As if. And then there is Will's conclusion

Economics is the only academic discipline that in recent decades has moved in the direction that America and much of the world has moved, to the right. Goolsbee no doubt has lots of dubious ideas -- he is, after all, a Democrat -- about how government can creatively fiddle with the market's allocation of wealth and opportunity. But he seems to be the sort of person -- amiable, empirical and reasonable -- you would want at the elbow of a Democratic president, if such there must be.

George Will's definition of 'empirical and reasonable' is 'won't rock the boat of the power elite'. I am not reassured here.

As to Liebman. Well his signature issue is the Liebman-MacGuineas-Samwick Non Partisan Social Security Plan Now I have had apologists on this site suggest this is just discarded work product from Liebman's days working for Clinton on Social Security and that Liebman is really not at heart a privatizer. Well given that the plan is dated December 2005, shows Liebman as lead author, and is hosted on Liebman's Harvard School of Government website, lets just say that I have my doubts. You can argue that the Personal Retirement Accounts in the LMS Plan are not really 'privatization'. But however you slice it this plan is horridly unfair to workers, it essentially bills workers a cumulative 5.2% of payroll to fix a 1.92% problem and then doesn't give lower income workers a fix. I don't know that Obama has signed on to this plan, but it worries me that he is taking advice from a guy that is openly advocating gutting Social Security as we know it.

Posted by Bruce Webb | February 27, 2008 1:21 PM

Bruce,

Actually, the skills-based hypothesis for the increasing income gap is extremely well-grounded empirically. And if you think about it, your anecdotal examples actually lend support to this hypothesis. Goolsbee isn't suggesting there has been a radical increase in the skill level of hedge fund managers or CEOs. He is suggesting there has been a "radically increased returns to skill." The fact that the multiples you are talking about have grown dramatically without a corresponding increase in the underlying skills is actually confirmation of this hypothesis. To use your terminology, this is pretty good evidence of a radical increase in the "skill premium" (again, which is different from saying there has been a radical increase in hedge fund manager or CEO skills, which is not what Goolsbee is claiming).

Posted by DTM | February 27, 2008 3:18 PM

Oh, and it's the GSB, not the GBS. And there really isn't a distinction between econ professors at the GSB and those across the midway. Tell Gary Becker that he's less of an economist because of his office location.

But the GSB is on the same side of the midway as Rosenwald! Although I suppose some economists set up shop at the Harris School, which is across the midway from both Rosenwald and the GSB.

Posted by Julian Elson | February 27, 2008 3:24 PM

Bruce,

By the way, note how what Goolsbee said, and what Will said about Goolsbee, line up with what I wrote earlier about the difficulty of analyzing behavioralists in late-20th-century "liberals like big government, conservatives like small government" terms.

Goolsbee is saying policymakers should in fact address the growing income gap, but also expresses a concern about needing to make sure the policymakers are actually addressing the root cause of the problem. Similarly, Will is noting Goolsbee will have "dubious ideas . . . about how government can creatively fiddle with the market's allocation of wealth and opportunity," but also describes him as "empirical and reasonable."

Again, all this is par for the course when it comes to behavioralists: typically they don't accept the premises that lead to free-market libertarianism, but typically they also think there are lots of ways in which governments can end up failing to address the problems that they are nominally concerned about. And that makes it very difficult for people stuck in the late-20th-century definitions of "liberal" and "conservative" to figure out how to apply those definitions to behavioralists.

Posted by DTM | February 27, 2008 3:30 PM

DTM
You are correct that Hayek probably had some effect on (especially) Friedman's intellectual development, but don't forget the two engaged in some major disputes over monetary policy in the early 1970's. In my opinion, they really shouldn't be lumped together in any broad "Chicago School" category except insofar as they were both suspicious of government intervention. The influence of Friedman/Stigler/et al. has been quite different than that of Hayek, who has inspired interesting work on information and institutions that doesn't depend on the same microfoundational logic of the neoclassicals.

Posted by chichi | February 27, 2008 4:37 PM

chichi,

Your point is well-taken. Indeed, having originally drawn a distinction between the "Chicago School" and economists who happen to have been at Chicago, I think it is fair to apply that distinction to Hayek.

Posted by DTM | February 27, 2008 5:26 PM

"Think of the contrast here as the difference between science-fiction writers and engineers. Reich and Galston (Clinton advisers) are the kinds of people who'd sketch out the idea for time travel in a moment of inspiration. Goolsbee et al. (Obama advisers) could rig up the DeLorean that would actually get you back to 1955."

Posted by Colin Hicks | February 27, 2008 5:38 PM

cc of note to the New Republic:

comment to Scheiber of New Repub -- his piece, “The Audacity of Data” at his blog at http://www.tnr.com/politics/story.html?id=4d40a39e-8f57-4054-bd99-94bc9d19be1a
_________________________

Pitch:

“Despite Obama's reputation for grandiose rhetoric and utopian hope-mongering, the Obamanauts [‘whether they're domestic policy nerds or grizzled foreign policy hands’] aren't radicals--far from it. They're pragmatists--people who, when an existing paradigm clashes with reality, opt to tweak that paradigm rather than replace it wholesale.”

Comment:

What a surprisingly sad, sad bunch of tired "wonks".

"Brought to you by the same bunch that utterly failed to solve the key foreign policy problem, Palestine, and thought that borderless ('free') trade sounded like a keen idea."

I voted for Kerry although he was wrong on all three of the key issues: war; trade; and Israel/Palestine.

Now I get to vote for a guy who's at least right on "war", but has somehow surrounded himself with yesterday's failed "thinking" on trade and Israel/Palestine.

Only in baseball is batting but .333 considered applausable?

Left to himself, Mr. Obama has proved both incisive and prescient. Hopefully, once he has a chance to think again, Obama will prove one of those "leaders who draw on the expertise of professionals without suffering the contagion of the professional fallacy, who enlist the loyalty and industry of bureaucrats without being paralyzed by their caution?" -- and we will find ourselves treated to "what happens when time-honored ways of aristrocrats and bureaucrats are displaced by the ever-risky question, 'Why not?'". (Daniel Boorstin, "The Amateur Spirit and Its Enemies"; Introducton and chapter 18 of "Hidden Histories; Harper & Row, 1987)

Posted by Lawrence Kelly | March 3, 2008 2:49 AM