Virus Shouldn’t Be Sole Focus for Biden Economic Aide
(Bloomberg Opinion) -- Three formidable challenges await President-elect Joe Biden’s new chief economic adviser. The first involves the short term, steering the U.S. economy from Inauguration Day to the point that the Covid-19 vaccine is in wide distribution. Then comes adjusting to the post-coronavirus new normal.
But her attention must also be focused on longer-term economic problems that were around before the pandemic and will remain after it recedes.
Cecilia Rouse will be Biden’s choice to lead the Council of Economic Advisers, according to news reports. By selecting Rouse, Biden has put a top economist with significant policy expertise and experience at the head of the internal White House economic research arm. That makes Rouse — who served as one of the top three CEA officials under President Barack Obama and is currently dean of the Princeton School of Public and International Affairs — well suited to advise Biden on the challenges facing workers in today’s weak economy. Biden also intends to nominate economists Jared Bernstein and Heather Boushey for the remaining two seats on the CEA, several news organizations reported Sunday.
The CEA’s job is to help the administration identify the tradeoffs from a policy change, including by anticipating the unintended consequences of a particular executive action or piece of legislation, and how the effects of policies can ripple through the system. Often, the most important question the CEA needs to answer is not whether a policy will have its intended effect, but how large that effect will be.
The CEA can also provide intellectual leadership among the economics profession more broadly.
As chair, Rouse will inherit an economy in urgent need of government support — particularly if Congress does not pass an economic stimulus law before Biden is sworn into office on Jan. 20. On her first day in office, Rouse should assess the economy’s need for fiscal policy support, which will probably be far less than the $2 trillion demanded by House Speaker Nancy Pelosi, but also more than the Senate Republicans are currently willing to accept.
Rouse should help the White House decide which programs should be included in a stimulus bill. The four most important, in my view, would be income support for households, revenue replacement for small businesses, aid to state and local governments and strengthening the social safety net.
After the Covid-19 vaccine is in wide distribution and the virus recedes, businesses will need to sink or swim on their own. Consumer preferences and businesses practices will have changed. Some industries will shrink (say, movie theaters) and others will expand (for example, home delivery). The faster the economy adjusts to the new normal, the quicker the unemployment rate will fall and income growth will resume. Government interference, however well intentioned, can be counterproductive if it slows down that adjustment.
Finally, Rouse should not let urgent priorities crowd out long-term thinking. The economy faces persistent ills such as slow productivity growth, declining workforce participation, reduced economic dynamism and lackluster education, skills and training systems. Rouse will be in a unique position among economists to keep these items on the White House radar. She will be able to use her stature to make sure economists outside the government debate these issues.
Biden is wise to select a CEA chairman who will feel a sense of accountability to the economics profession. This will lead Rouse to take seriously the opinions of conservatives and progressives, Republicans and Democrats, sharpening her own views by exposing them to disagreement and by testing them against other economists. That sense of accountability also helps to ensure that the analysis produced by the CEA will be consistent with known best practices. Economists who have to answer to peers after leaving the White House will be much less likely to go off the deep end.
They’re also more likely to challenge authority. For example, a president who is pushing a new middle-class entitlement program may want to argue that it will pay for itself, or that the U.S. government can spend without restraint because debt doesn’t matter. Any economist would feel some pressure to provide support for the president’s political and communications strategy. An economist who also feels pressure from the broader community will be less likely to succumb to internal White House pressure.
Excellent economists often disagree about the strengths and weaknesses of existing evidence, statistical and analytical technique, the relative importance of different economic factors and theories, and political philosophy. There’s nothing wrong with selecting White House economic advisers who broadly share a policy vision and goals or the same political sensibility, as long as partisan considerations don’t impair professional judgment.
With Rouse, they won’t.
The nomination of Rouse, Bernstein and Boushey places the CEA in good hands. With Janet Yellen as the nominee for Secretary of the Treasury and Neera Tanden as his pick to direct the Office of Management and Budget, Biden’s economic team will be a solid mix of academic and policy expertise, experience and political acumen.
This group is decidedly progressive, and I am certain I will disagree with many of their policy objectives and conclusions. But they are an excellent team for a Democratic administration, and each of these nominees deserves to win Senate confirmation. They are expert, competent professionals — and that is what Biden will need to help get the economy back on track.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Michael R. Strain is a Bloomberg Opinion columnist. He is director of economic policy studies and Arthur F. Burns Scholar in Political Economy at the American Enterprise Institute. He is the author of “The American Dream Is Not Dead: (But Populism Could Kill It).”
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