Outside View: Replacing Larry Summers by Peter Morici

Outside View: Replacing Larry Summers

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by Peter Moricihttp://www.terradaily.com/reports/Outside_View_Replacing_Larry_Summers_999.html College Park, Md. (UPI) Sep 22, 2010 The chairman of the National Economic Council is the gatekeeper to the Oval Office for economic information and principal adviser to the president of policies for economic recovery. He prepares the daily brief on all the economic data journalists and analysts report and write about. Hence, replacing Lawrence Summers, who said this week he was leaving the post, with someone from industry, for example Anne Mulcahy, former chief executive of Xerox, would be a mistake even if that is likely to happen.
Simply, Mulcahy doesn't have the background to effectively advise the president on the intricacies of topics ranging from the Consumer Price Index to the effects of inventory purchases on actual and sustainable gross domestic product growth. Think of it like an NFL team -- you want a running back as your featured back not a wide receiver.
The Obama administration needs private industry expertise but other vacancies will emerge in the Cabinet -- for example, Commerce Department secretary -- and it would be better to put Mulcahy there, or at Health and Human Services to implement national healthcare. She is currently chairwoman of Save the Children.
Whoever President Barack Obama picks, that person will be liberal.
Economists know that temporary investment tax credits and jobs tax credits only have temporary and quite limited effects but this president likes that sort of thing. Summers' replacement must be an economist who will go along or an industry leader who can polemic an alibi or be excused for not knowing better. This person, if he or she is an economist, must soft peddle the limitations of policy tools the president likes.
Often-mentioned Laura Tyson is the perfect fit. She is a champion of industry and manufacturing, liberal and an accomplished economist -- she is rather flexible in her interpretation of economic evidence. She isn't the Harvard theoretician northeastern liberal establishment economists would recommend -- a.k.a. Alan Blinder from Princeton -- but the establishment can't oppose her because of her tour of duty as Clinton chairwoman of the Council of Economic Advisers.
Summers' deputy, Diana Farrell, has liabilities among manufacturers. She has a track record of advocating outsourcing. That would make her a friend of multinationals heavily invested in China, like Caterpillar and GE, but would hurt her with domestically focused companies that want something done about China.
If the president goes with Farrell, it is a key indicator he isn't serious about outsourcing and doing something about China's currency and protectionism.
Finally, the best person for the job may be Alan Blinder. I prefer Tyson for her industry roots -- but Blinder is likely most acceptable to Wall Street and Harvard/Princeton axis of ideological and credentials purity. He could be Treasury secretary or Federal Reserve chairman -- Tyson would be a poor choice for those jobs.
Summers' position would permit the president to test drive Blinder. However, look for the president to go with a woman because the other two top economics posts are held by men.
(Peter Morici is a professor at the Smith School of Business at the University of Maryland and former chief economist at the U.S. International Trade Commission.)
(United Press International's "Outside View" commentaries are written by outside contributors who specialize in a variety of important issues. The views expressed do not necessarily reflect those of United Press International. In the interests of creating an open forum, original submissions are invited.)