At this point, Larry Summers isn’t just the favorite for Federal Reserve chairman. He’s the overwhelming favorite. Unless something truly unexpected shows up in the vetting process (a paid toast at Bashar al-Assad’s birthday party, for example) or the administration comes to believe Senate Democrats will revolt against a Summers nomination, he’s going to get the job.
That shouldn’t come as a shock. A close look at the rest of President Barack Obama’s economic appointments makes clear that the shock would be if he didn’t go with Summers.
An early surprise of the Obama administration was how much it looked like the Clinton administration, at least on the economics side. Summers was back. So were Tim Geithner, Peter Orszag, Jason Furman, Gene Sperling, Jack Lew and Mike Froman. “Barack Obama has succeeded where Hillary Clinton failed,” wrote Rich Lowry in the National Review. “She hoped to win a third Clinton term, but it is her vanquisher who is reconstituting the Clinton administration.”
Obama’s reliance on Clinton-era econ whizzes was sensible. As a relative newcomer to national politics he didn’t have a network of economic experts of his own to choose from, and given the severity of the economic storm, there wasn’t time for his team to learn on the job. Culling experienced crisis managers from the last Democratic administration was the obvious choice. And even as Obama appointed a number of familiar faces, he brought some new voices to his economic team, too.
Christina Romer, the famed economist from the University of California at Berkeley, was tapped to lead the Council of Economic Advisers. Obama’s longtime economic adviser Austan Goolsbee was placed in charge of the Economic Recovery Advisory Board. Jared Bernstein, a labor economist much loved by liberals, was asked to serve as the top economist to Vice President Joe Biden.
Clinton Clique
Four years later, any newcomers Obama appointed are gone. The top slots on the economic team are all held by members of the Clinton clique. Sperling leads the National Economic Council. Lew is secretary of the Treasury. Furman is chairman of the Council of Economic Advisers. Sylvia Matthews Burwell, deputy director of the Office of Management and Budget during the Clinton administration, now heads OMB.
A glance at Obama’s second-term foreign policy team makes clear how unusual this is. John Kerry was recruited from the Senate to serve as secretary of state. Former Senator Chuck Hagel was named secretary of defense. Samantha Power — a Pulitzer Prize winner and academic superstar who had to step down from Obama’s 2008 campaign for calling Hillary Clinton “a monster” — is United Nations ambassador. Denis McDonough, a foreign policy adviser to Senator Tom Daschle and then to Senator Obama, is now chief of staff. The only Clinton administration veteran is Susan Rice — and she made a high-profile break with her former peers to endorse Obama in 2008.
The economic team’s insularity is often attributed to the influence of ex-Treasury Secretary, ex-Goldman Sachs & Co. Co-Chairman, and ex-Citigroup Inc. Director Robert Rubin. The case is usually made by way of a vigorous game of six-degrees-to-Bob-Rubin. Summers and Sperling were both his deputies. Burwell was his chief of staff. Lew worked with him at Citigroup. Furman ran his think tank. QED.
Rubin served at the top levels of the Clinton administration — as NEC director, and then as Treasury secretary — from 1993 to 1999. Sperling wasn’t quite as senior as Rubin, but he hired Furman, Orszag and Burwell to some of their early jobs, and discovered Deputy OMB Director Brian Deese. But nobody talks about Sperling-ism — even though, unlike Rubin, he actually serves in the Obama administration, and regularly speaks with the president.
Rubin’s absence — and relative lack of influence with Obama himself — makes the team’s persistence all the more striking. Few professional networks strengthen themselves across multiple terms of multiple administrations once their main patron departs. This one has.
Democratic Consensus
The reason commonly assumed is ideology, and there’s something to that. The team has disagreements — Summers was relatively more interested in stimulus and less interested in deficit reduction than Geithner, for example — but they’re not vast. All its members exist comfortably in the center-left consensus that currently dominates Democratic politics: taxes on the rich should be higher, the safety net for the poor should be more generous, and government should be careful when interfering in the market. It’s a consensus that Obama shares, but one that many other Democratic economic policy wonks share, too — Obama would have no problem finding new recruits to carry out that vision. As such, it doesn’t really explain why he’s stuck to this one network.
Privately, members of Obama’s economic team think the answer is that they’re just really, really good at their jobs. It’s a self-serving argument, to be sure, but that doesn’t mean it’s wrong.
The Clinton administration had, by most accounts, a high-functioning economic team, and these are the people who rose highest and fastest within it. Running a White House’s economic policy is a tough and unusual job, and not that many people have experience doing it. That combination of good and qualified is rare in the world, but it happens to be common among this one group of people.
If this team wasn’t good, well, Obama’s management of his foreign-policy team shows he’s perfectly happy to try out new faces and develop his own people. The fact that he has stuck to the same people prized by Rubin and Clinton on the economic side merely shows that these people are really good.
There’s truth to that. But it stretches credulity to believe that a pure meritocratic process has simply and ineluctably led to the same six or seven people cycling among positions. Meritocracy is an element in the team’s success, but so is the fact that when it comes to his economic team, Obama doesn’t take chances.
In interviews with current and former administration officials who served both on and off the economic team, one theme keeps recurring: It’s impossible to overstate how formational the experience of the financial crisis was to Obama’s presidency.
Risk Aversion
And it wasn’t just the financial crisis. There’s also been European debt crisis, the unexpected debt-ceiling crisis and the lingering jobs crisis. The extended firefighting forged strong bonds between Obama and his top policy makers. More than that, it led the president to a deep risk aversion when appointing new members of the team. The heavy knowledge that the economy can fall apart at any moment makes it dangerous to take a flier on some untested newcomer.
But if the bar for each appointment is that the economic team already likes the candidate and knows he or she is good at the job and will work well with the other members of the team, then the only people who will clear the bar are people the economic team has already worked with. And because all the members of the team have similar backgrounds that brought them in contact with many of the same people, the same people get chosen again and again.
There’s a real element of merit in this, in the sense that it wouldn’t work if Obama didn’t genuinely think his economic team was doing a superlative job. So long as he is pleased with the job they’re doing, the path dependence is almost unbreakable.
This basic model fits every major economic appointment Obama has made since taking office. It explains why the president has named only one person who wasn’t in the administration in 2009 to a top economic position — Burwell, who served with (and impressed) every other member of Obama’s economic team in the Clinton administration. And it explains why Obama strongly favors an inside candidate such as Summers for the most important economic appointment of all.
