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Romer's Departure Raises Questions And Concerns About White House's Economic Team

First Posted: 08/06/10 03:49 PM ET Updated: 05/25/11 06:15 PM ET

Romer

Upon entering the White House in the winter of 2009, President Obama asked his economic team to come up with potential solutions to the economic crisis he had inherited. According to a lengthy profile of that team by the New Yorker's Ryan Lizza, Christina Romer, the chair of the Council of Economic Advisers, outlined three different-sized stimulus packages. The first was $600 billion. The second: $800 billion. The third would be $1.2 trillion.

Romer's work was supported by the weight of historical analysis. The former Berkeley professor was a leading expert on the government's response to the Great Depression. But when her memo finally made its way to Obama's desk, the $1.2 trillion package was missing. At the meeting, Lizza reported, "there was no serious discussion to going above a trillion dollars."

Who removed the $1.2 trillion suggestion is unclear, though Lizza pointed the finger at senior economic adviser Larry Summers and now-former Office of Management and Budget Director Peter Orszag. Senior Adviser David Axelrod was quoted saying that that the idea was a non-starter on Capitol Hill. It likely was.

Nevertheless, when Romer announced her resignation from the White House on Thursday evening, the stimulus story provided a useful window into the limitations and frictions that have affected the Obama administration's economic policies. It also raised the question: Who in the administration can assume the role she played -- untainted by the perception of Wall Street ties and willing to make the case for enhanced stimulus spending?

Upon announcing her resignation, Romer stressed that it was not driven by bad blood or disappointments. "I feel very strongly that my voice has absolutely been heard," she told MSNBC. "And I also have to tell you, I feel the economics team has learned to work together very well. I know there were lots of reports of some fireworks early on, but the truth is we have become good friends and good colleagues."

This was a rosy reflection of her tenure as chair of the CEA, one that her soon-to-be former colleagues echoed publicly as well. Dig a bit below the surface, however, and you get different insights into how the bureaucratic debates played out. One economic adviser who worked with both Summers and Romer said that the latter was "essentially" driven out by the former.

"[Summers] has kept Romer, [Austin] Goolsbee, [Paul] Volcker all outside the inner policy circle. For Romer, why stay under these conditions, when she would lose her tenure if she stayed for more than two years?" the adviser said.

This was similar to the assertion made by the first story that reported Romer's resignation (published by Hotline). But a White House aide, also speaking on condition of anonymity, insists that the idea that the former CEA chair was marginalized by Summers is not only misleading, it's untrue.

"It is such an old story that they have had conflicts," the aide said. "Were there early tensions? Sure. They were widely reported. But the story is written like that was the basis for her leaving and that's just crazy."

Summers, indeed, praised Romer in a public statement Thursday for her service in the administration, pledging to keep turning to her for guidance once she re-entered the world of academia. Another economic adviser who worked with both said that they actually became philosophical allies during some of the weightier economic debates.

"The balance of power on the economic team changed briefly with Peter Orszag's departure. He was the main antagonist of Summers' and Romer's in advocating a stop to measures supporting discretionary spending," the adviser said, demanding anonymity. "Summers and Romer were actually closely aligned on macro-economic policy."

Obama ultimately sided with Orszag and has, as an aide noted, declined to revisit that decision.

In the end, reports of frictions that may have existed inside the White House's economic team constitute little more than palace intrigue. The far more substantive question is what will Romer's departure mean for the administration's policies.

Among the most visible Obama economic aides, the former CEA chair was one of the few who was not perceived to have ties to Wall Street. It was, in a way, unfair to the others. Treasury Secretary Timothy Geithner never held a Wall Street job. But it's a reality that even top-ranking administration officials admitted on Friday is a problem going forward.

More than that, Romer served as a mouthpiece and conduit for many of the concerns held by some of the more progressive constituencies.

"She was definitely more sympathetic [than Summers and Geithner], was willing to listen to us," said one top labor official. "In what was supposed to be a 'team of rivals' she was one of the only economic people that weren't from the old Clinton team so it's disappointing she's the one who's going. She was also the one from day one saying recession would be worse than people were saying and that we needed a bigger stimulus package. So, again, unfortunate that the person who was right is leaving."

Indeed, despite being tarred for penning a memo that suggested unemployment wouldn't rise above eight percent, Romer was one of the most vocal proponents of an "overwhelming" response to the unemployment crisis, fiscal concerns be damned.

"You don't get your budget deficit under control at a 10 percent unemployment rate," she told CNN's "State of the Union" back in January 2010.

The White House claims that Romer wasn't that far apart from her colleagues when it came to supporting more targeted spending to spur economic relief. Spokesperson Jen Psaki noted that both "Secretary Geithner and Director Summer led the fight to get Wall Street reform passed. They were part of the team that led the fight to get the Recovery Act passed. They were there every step of the way to get key assistance to small businesses and Main Street companies through Congress, and they will continue to be."

On the more specific matters of regulatory reform and continued stimulus spending, the distinctions between Romer, Summers and Geithner are more acute. But the overall lesson to be drawn from Romer's departure may, in the end, be that she was inhibited more by a lethargic political process than by fellow White House colleagues. Placed in a unique position to turn academic knowledge into concrete policy, she found out that there were few political similarities between the Great Depression and the current recession other than, of course, severe economic suffering.

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