Obama's CEO Problem

I find it difficult to get worked up about debates over whom the president should pick to succeed Rahm Emanuel as chief of staff or Lawrence Summers as head of the National Economic Council (NEC). These are important jobs, but they're fundamentally staff jobs whose occupants work for the president and have little to no autonomous decision-making authority. Under the circumstances, Barack Obama should pick people he likes, and the only real mystery is what's taking so long.

But recent news accounts about the consideration being given to former Commerce Secretary William Daley for the post of chief of staff and former Deputy Treasury Secretary Roger Altman for the NEC reveal some disturbing things about the White House thought process. In particular, someone or other in the White House keeps telling reporters that these men are appealing options in part because they're former business executives, the sort of thing that "would almost certainly improve icy relations between the Obama administration and business leaders."

This line of thought is a Russian nesting doll of misguided notions.

The idea, as best one can tell, is that hiring a business executive will make CEOs feel better about the White House, and these warmer sentiments from CEOs will increase business confidence and therefore hiring, thus improving the economy. Or maybe the idea is that warmer sentiments from CEOs will lead to businessmen praising Barack Obama, which will make him more popular. However you slice it, the idea is ill-conceived.

For one thing, there's something very odd about the idea that anyone is clamoring for more shady-looking revolving-door arrangements between Washington and Wall Street.

These guys aren't just business executives; they're specifically finance guys. Altman is a veteran of Lehman Brothers and the Blackstone Group and founder of a firm with the ridiculous name Evercore Partners. Daly works at J.P. Morgan. In some respects, I think the tendency of economic policy-makers of either party to park themselves in the financial-services industry when they are out of power is actually less pernicious than is commonly believed. People need to work somewhere between administrations, and the think-tank world simply lacks the capacity to absorb the number of people who shuffle out of office when administrations change. It's quite possible, in other words, that either of these men is so indispensable that it would be smart for the president to take the temporary hit associated with adding a financier to his team. But you have to wonder what the political team is thinking if it thinks this would generate a positive initial reaction.

More broadly, however, the focus on the subjective feelings of business executives is completely misguided. The executive class' views on public policy are often misguided, and its feelings about it are irrelevant.

Way back in 1933, one of the Franklin D. Roosevelt administration's earliest actions was to take the United States off the gold standard and inaugurate an expansionary monetary policy. At the time, the business community hated it. Businessmen hated monetary unorthodoxy, they hated Roosevelt, and they especially hated the combination of the two. But guess what? It worked. The United States' economy grew like gangbusters for four straight years, and FDR cruised to re-election. Virtually all economic historians -- from Milton Friedman and Anna Schwarz on the right to Christina Romer on the left -- credit the move with saving the economy. But businessmen hated it at the time, and they went on hating it for years.

The stream of "Obama should be more like FDR" parables from the left over the past two years has gotten a bit tired. So consider a more recent comparison: Bill Clinton. Clinton took office at a time of sluggish growth and high interest rates. To bring rates down, he needed to close the budget deficit. In order to close the budget deficit, he needed to raise taxes. Businessmen, once again, hated this idea. They went on hating it for eight years, at which point they successfully backed George W. Bush. Then, in 2001 and 2003, they backed efforts to undo the increases. What we learned from this episode is that rich businessmen want to pay low taxes.

That, of course, is their right as Americans. But the fact of the matter is that during the Clinton era, they were wrong, and in not heeding their wishes, Clinton perked up the economy, giving us the best growth in a generation.

What's needed in a White House staff is people who will help with the difficult business of administering the executive branch. If that means Daley or Altman or both, so be it, but building sentimental bridges to corporate America should play no part of it. Making businessmen happy is neither necessary nor sufficient to produce economic growth. Business-community whining wasn't a barrier to growth in the 1930s or the 1990s. Nor did growth in the 1930s or 1990s put an end to business-community whining. Business executives, it turns out, are older, whiter, richer, and maler than the country as a whole. And as everyone knows, older white people -- especially the high-income and male ones -- have a lot of conservative political views. Executives are no exception. They have right-wing political opinions and don't like Democrats. There's nothing wrong with that, but it's foolish to expect it to change. The good news is that it's neither politically nor economically necessary to make CEOs like the president. What's needed is more attention to job-creation and less attention to the wounded feelings in the executive washroom.

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