The chairman of the National Economic Council is the gatekeeper to the Oval
Office for economic information, and principal advisor to the president of
policies for economic recovery.
He prepares the daily brief on all the economic data journalists and analysts
report and write about. Hence, replacing the incumbent Larry Summers, who has
announced his intention to quit after the mid-term elections in November, with
someone from industry, as has been widely suggested and is likely to happen,
would be a mistake. Former Xerox chief executive Anne Mulcahy is one touted
Simply, Mulcahy does not have the background to effectively advise the
president on the intricacies of topics ranging from the
consumer price index to the effects of inventory purchases on actual and
sustainable economic growth. Think of it like an National Football League team
- you want a running back as your featured back, not a wide receiver.
The White House administration needs private industry expertise but other
vacancies will emerge in the cabinet - for example, commerce secretary - and it
would be better to put Mulcahy there, or at Health and Human Services to
implement national health care. She is currently chairman of Save the Children.
Whoever the president picks, he or she will be liberal. Economists know that
temporary investment tax credits and jobs tax credits only have temporary and
quite limited effects, but President Barack Obama likes those sorts of things.
Summers' replacement must be an economist who will go along or an industry
leader who can polemic an alibi or be excused for not knowing better. This
person, if an economist, must soft-peddle the limitations of policy tools the
Often mentioned Laura Tyson is the perfect fit. She is a champion of industry
and manufacturing, liberal and an accomplished economist - she is rather
flexible in her interpretation of economic evidence. She is not the Harvard
theoretician northeastern liberal establishment economists would recommend -
aka Alan Blinder from Princeton - but the establishment can't oppose her
because of her tour of duty as president Bill Clinton's chair of the Council of
Summers' deputy, Diana Farrell, has liabilities among manufacturers. She has a
track record of advocating outsourcing. That would make her a friend of
multinationals heavily invested in China, such as Caterpillar and GE, but would
hurt her with domestically focused companies that want something done about
If the president goes with Farrell, it is a key indicator he is not serious
about outsourcing or about doing something on China’s currency and
Finally, the best person for the job may be Blinder, at present an economics
professor at Princeton University. He formerly served on president Clinton's
Council of Economic Advisors and as the vice chairman of the board of governors
of the Federal Reserve System. I prefer Tyson for her industry roots, but
Blinder is likely most acceptable to Wall Street and Harvard/Princeton axis of
ideological and credentials purity. He could be Treasury secretary or Federal
Reserve chairman - Tyson would be a poor choice for either of those jobs.
Summers' position would permit the president to test-drive Blinder. However,
look for the president to go with a woman because the other two top economics
posts are held by men.
Peter Morici is a professor at the Smith School of Business at the
University of Maryland and former chief economist at the U.S. International