The fight over whether Stephen Friedman should be President Bush’s new top economic adviser reminded me of going to livestock auctions as a kid and seeing a farmer bring in a gunny sack full of surplus cats to sell.
There was a lot of yowling, scratching and jumping around going on inside the sack, but it was difficult to tell exactly who was winning and who was losing.
The president sorted it out Thursday afternoon, of course, by formally appointing Friedman, a former chairman at Goldman Sachs and a respected Wall Street figure, to succeed Lawrence Lindsey, who had been pushed aside a week earlier.
The problem was that Bush faced criticism from people who usually support him: conservatives who ardently favor cutting taxes to stimulate the economy. The tax-cut fundamentalists argue that, based on what Friedman has said in past speeches and articles, he’ll be more interested in deficit reduction than cutting taxes.
The president was in a tight spot. To win in 2004, he must reassure the general population that his economic initiatives are steered by competent, experienced individuals. However, he also needs to reassure core supporters that the appointee is a dyed-in-the-wool tax cut fundamentalist.
I am not being partisan when I say the number of competent, experienced economists who always support tax reduction is very small. Departing adviser Lindsey was one such person, but apparently even he did not meet the Bush administration’s expectations.
By finally opting for Friedman, the president missed a golden opportunity — one that would have carried the additional advantage of exemplifying his emphasis on smaller, more effective government. He should have abolished the National Economic Council and the position Lindsey held and Friedman will now take.
That this position and council even exist is an interesting case study in organizational behavior. It shows bureaucracies have an inherent tendency to grow.
Bush doesn’t need a National Economic Council. He already has the Council of Economic Advisors, which is led by R. Glenn Hubbard, a respected Colombia University economist. Hubbard’s predecessors include two eventual Federal Reserve Board chairs, Arthur Burns, who advised Eisenhower, and Alan Greenspan, who served Gerald Ford.
Other past chairs include Nobel laureate Joseph Stiglitz and a long list of other distinguished economists including Arthur Okun, Herbert Stein, Martin Feldstein and Gardner Ackley. This council, formed in 1946, reached its zenith in the Kennedy administration, when University of Minnesota professor Walter W. Heller was the chair. Heller was not a great theoretician, but he was a great communicator. He hired brilliant economists, gained JFK’s ear, and sold the administration’s policies to Congress and the general public.
But offices tend to multiply in government. For instance, while the Secretary of State has a constitutional mandate to carry out the country’s foreign policy, presidents since the 1960s have also had a National Security Council led by a National Security Adviser.
As a result, the last 30 years have been marked by bitter turf wars between the NSC and the State Department — Kissinger vs. Rogers under Nixon, Brzezinski vs. Vance under Carter, MacFarland and Poindexter vs. Schultz under Reagan and now Rice vs. Powell under George W. Bush. But it is hard to see how this proliferation of advisers and competing power centers has really improved U.S. foreign policy.
The same thing is happening in economic policy. Congress created the Council of Economic Advisors with the support of the Truman administration because of a perception that the Treasury department was dominated by bookkeeping functions and weak in economic analysis.
A few years later, the stodgy Bureau of the Budget was transformed into a larger Office of Management and Budget, with a large staff of professional economists to analyze various policy proposals. OMB Director David Stockman did for President Reagan what Walter Heller did for JFK.
These agencies do credible work. But we surely don’t need any more duplication of effort on this front.
The president missed a golden opportunity to roll back bureaucracy and avoid dissension among his supporters. He now has a new economic adviser, but it’s hard to see how he is better off than if he had quietly streamlined his own ship.
© 2002 Edward Lotterman
Chanarambie Consulting, Inc.