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     Sep 24, 2010
Hunt on to replace Summers
By Peter Morici

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 possibility.

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 president likes.

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 Economic Advisors.

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 China.

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 protectionism.

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 Trade Commission.

(Copyright 2010 Peter Morici.)

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