Changes to White House economic policymaking

This morning President Obama is expected to name Gene Sperling as head of the White House’s National Economic Council (NEC) — replacing Larry Summers. For those of you who don’t remember, Gene was a key economic advisor to the Clinton campaign, deputy head of the NEC under to Bob Rubin, and then head of the NEC when Rubin moved over to Treasury. In the Obama Administration, he has served as an advisor to Treasury Secretary Geithner. So, Gene is an old hand at the job.
I expect the nature of the job to change somewhat in two respects. First, Larry Summers was essentially a macroeconomist. Gene Sperling is a policy wonk — of the first order. He likes to call himself a pro-growth progressive — who is deeply worried about the rise of economic inequality and the stagnation of the middle class. In part that means taking an active government role in more microeconomic concerns. For example, his take on the competitiveness issues is different from Summers. Here is an excerpt from his 2005 book (The Pro-Growth Progressive):

One positive outgrowth of the outsourcing debate may be an increased focus on the policies that maintain a competitive environment for quality job creation: research, fiscal, technology, regulatory, and education policies to improve innovation and build a highly skilled workforce. The United States must always compete for the cutting-edge industries likely to drive higher-wage job creation in the United States. Continually advancing to the cutting edge ensures that as technology and automation increase the ease of out-sourcing, we are developing new products and services that create new job opportunities at home.
Still we can do far more to compete even for the jobs that are not on the cutting edge or require advance technology degrees. When people hear that American jobs are being replaced by foreign workers at 10 percent of the wage costs, they may feel there is no hope of competing for any job that is not highly skilled or requires a physical presence in the United States. Some fear that our economy will see a hollowing- out of middle-class jobs. Yet, to the degree that wages become a smaller portion of the cost of overall production, even automation can increase the ability of the United States to compete for those jobs based on factors we can control: health care costs, modernized technology infrastructure, tax policy, and the skills of our workers. When America loses a job because a poorer nation can provide that service dramatically cheaper, there may be nothing we can do. But why should we ever lose even a single American job because there is better broadband in Bangalore than in Buffalo?

Second, I expect Sperling’s style to be very different than Summers. Summers was a principle — he viewed himself as a policymaker (the policymaker?). Sperling learned his role from Bob Rubin — who viewed the role of the NEC as a facilitator and honest broker. This is the standard difference is roles that is usually seen best in the National Security Advisor (the Kissinger model versus others).
So I expect to see some shift in economic policymaking in the White House. I think Gene Sperling gets it. Tellingly, the President is scheduled to make the announcement at a factory which makes energy-saving windows in suburban Washington. Also tellingly, there is some talk that Ron Bloom — the so-called manufacturing czar — will be moving from the Treasury Department to the White House. And there is the appointment of Bill Daley — a former Commerce Secretary — as Chief of Staff.
So, all in all, the White House is becoming more populated with those who understand the need to confront not just the macroeconomic crisis, but the structural and competitiveness challenges facing America. I hope that in all of this shift the Administration will also recognize and take on the need to better foster and utilize our intangible assets. For that is what will be needed to succeed in the new I-Cubed Economy.

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