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Wednesday, April 18, 2007

Economic Advisers

How much influence do the economic advisers to presidential campaigns have over the types of policies candidates will support?:

The Advisers Are Writing Our Future, by David Leonhardt, Economix, NY Times: In the late 1990s, a small team of economists began traveling down to Austin, Tex., for occasional visits with Gov. George W. Bush, then an unannounced candidate for president. The economists were mostly old Republican policy hands. The youngest member of the group — the only one who hadn’t worked for Ronald Reagan or Gerald Ford — was Glenn Hubbard, a Columbia professor in his early 40s.

After Mr. Bush won, Mr. Hubbard went on to become the chairman of the Council of Economic Advisers and an architect of the tax cut... Mr. Hubbard was later responsible for bringing Ben Bernanke, then a professor at Princeton, into the Bush orbit.

All of which is to say that the early advisers to presidential candidates can leave a big imprint. For the 2008 campaign, the six leading campaigns have each signed up their first-string economic policy teams. ... If the next president is going to reform health care, attack climate change or address middle-class anxiety, the solution is going to be shaped by these policy advisers. As Douglas Holtz-Eakin, John McCain’s director of economic policy, says, “If you’re specific about what you want to do and you win, you have a mandate.”

For now, the more interesting story is on the Democratic side. Among the Republicans, the three main candidates — Mr. McCain, Rudy Giuliani and Mitt Romney — all favor extending Mr. Bush’s tax cuts. That leaves the campaigns less room to propose other policies that cost money. It also makes it harder for the candidates to seem serious about the long-term budget deficit...

The Democrats, besides talking about a broader range of subjects, also have the freshest face among the top campaign advisers — Barack Obama’s lead economist, Austan Goolsbee ... at the University of Chicago... The two men met when Mr. Obama was teaching at the law school there, and they both seem to favor achieving Democratic goals through market-oriented policies. As Mr. Goolsbee has written: “Moral exhortation doesn’t change people’s behavior. Prices do.” ...

But the biggest reason he got the job may simply be that many Democratic economists were already loyal to Hillary Clinton. Her team is dominated by former aides from her husband’s administration...

Both the Clinton and Obama campaigns are now playing catch-up on policy ideas. John Edwards, who’s running third in fund-raising and the early polls, has tried to grab attention by releasing a series of specific proposals. Rather than bringing economists into his campaign, he is relying on a network of former aides from Capitol Hill to help him sort through ideas...

To me, the most compelling question is how the Clinton and Obama campaigns will respond to Mr. Edwards’s health care plan. ... It’s a serious plan... Mr. Edwards’s white paper on health care includes ... these ideas, but he doesn’t emphasize them on the stump. And this is the sort of change that will require political leadership. Will Mrs. Clinton or Mr. Obama try to provide it?

For that matter, will one of the Republicans? At this point, they are focused on taxes... “We’re facing a gigantic tax increase,” said Michael Boskin, a top Giuliani adviser...

It’s conceivable that Mr. Romney may go even further than extending the recent tax cuts and propose new ones. His top economic advisers are Mr. Hubbard; Gregory Mankiw, ...; and John F. Cogan, a Reagan budget official now at Stanford. They like tax cuts.

Mr. McCain, for his part, voted against both of the big Bush tax cuts. He said the first was too big and didn’t do enough to help the middle class, while the second was too expensive in a time of war. But because letting them expire would feel like a tax increase — and because Mr. McCain knows how his primary voters feel about tax increases — he supports them now.

Eventually, though, the Republican candidates will talk about issues besides taxes. To deal with the budget deficit, they will have to come up with ideas for spending cuts..., which will bring the debate right back to health care.

The truth is that if you put the economic advisers, from both parties, in a room and told them to hammer out solutions to the country’s big economic problems, they would find a lot of common ground. ... Not all of these ideas are politically feasible..., but presidential campaigns can change what’s feasible. Here’s hoping that this year’s crop of economic advisers has the courage of their convictions.

Given the candidate's objectives, I would guess the economic advisers have a lot of room to design and recommend the best policies to achieve those goals. Maximization under the constraint of achieving well-defined political objectives. But I wonder how much influence the economists have on the objectives themselves? From the recent reaction to Robert Rubin's influence in the Democratic party, it's apparent some people believe the influence is significant, more than I would have thought.

Update: Dean Baker with more.

    Posted by on Wednesday, April 18, 2007 at 12:06 AM in Economics, Politics | Permalink  TrackBack (0)  Comments (4)

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