Austan Goolsbee Exit: Obama Adviser Leaves Behind Frustration, Political Dysfunction
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Austan Goolsbee, one of President Barack Obama's longest serving policy advisers and the chairman of his Council of Economic Advisers, leaves his post pretty much as he inherited it: with the economy moribund, no clear path to vigor in sight and the unemployment rate stubbornly elevated.
More than ever, the atmosphere in Washington seems so laced with toxicity that policymakers have largely given up merely debating how to spur the economy, cognizant that any approach will be deemed politically impossible.
This, suggest policy-watchers, appears to have played at least some role in prompting Goolsbee to finally throw it in and head back to the University of Chicago to resume his academic career. He felt frustrated and tired of seeing what he viewed as necessary policies sacrificed to the imperatives of political positioning and compromise.
So runs the narrative among those inclined to accuse the administration of failing to marshal an adequate response to the strains of the Great Recession, setting aside plans to put Americans back to work via government-financed projects in favor of scrimping to shrink budget deficits.
"There's no question that the administration has made the deficit a top priority for much of the year," Dean Baker, co-director for the liberal Center for Economic and Policy Research, told the Huffington Post. "That's led the administration to abandon any idea of any kind of stimulus or effort to stimulate the economy and I think that may be somewhat frustrating or at least troubling for a wide range of economists. Goolsbee may not be an exception."
Despite his connection to the University of Chicago -- best known as the intellectual hot house that produced Milton Friedman and scores of conservative thinkers ever after -- Goolsbee is generally claimed by progressives as one of theirs, for his tendency toward the prescriptions of John Maynard Keynes, who held that in times of high unemployment, the government had to stimulate economic activity by unleashing spending.
Goolsbee helped craft the administration's $800 billion stimulus spending plan. Unleashed in early 2009, it has, for better and worse, come to define the administration's approach to the economic crisis it inherited. Conservatives portray it as a pinata stuffed with wasteful spending treats for special interests, a package that has done little for the economy. Progressives deride it as too small to make enough of a difference. Many economists assert it has prevented the unemployment rate from rising even higher, even as it has not fixed everything.
In subsequent comments, Goolsbee has seemed to place himself in the camp that would have favored more and faster in the way of stimulus; in particular, more aid to strapped states that wound up laying off teachers and other employees.
"The whole thing was almost like an administration in a box and we had to sort it out in just a few weeks," he told a television interviewer in the fall of 2009. "If it was up to me, I would have put more money into the state fiscal relief."
Like other prominent administration economists, such as Larry Summers, who stepped down from his position as top economist advisor to return to Harvard, and Christina Romer, who left her seat on the Council of Economic Advisors for the welcome embrace of the University of California, Berkeley, Goolsbee cited the pull of the academy as the driving force. He says he wants to go back to Chicago, where he teaches at the business school. In the Obama administration argot, it seems, satisfying the rules of tenure has apparently become the new version of "spending more time with the family."
In an email, a senior administration official told HuffPost that "going back to teach in the fall" was always Goolsbee's plan, dismissing any suggestion of drama around the announcement.
Goolsbee remains very close to the president, according to insiders. An administration official said that he kept Obama informed of his talks to return to academia and pledged to both be involved in his 2012 reelection campaign and remain an outside adviser to the White House. Goolsbee also has a far better standing among other members of the Obama economic team than, for example, former top adviser Summers.
"He has been working for the president between campaign and White House for four plus years," said the administration official. "The typical time for a leave at University of Chicago is two years."
Indeed, Goolsbee always appeared to be a transient in Washington. He rented his house in the capital, choosing to keep his home in Chicago.
But a survey of Goolsbee's pronouncements and positions suggests that he chafed against the perpetual compromises implicit in governing -- surely a source of frustration in any era, and especially so for an economist serving in the current moment, amid warnings that a failure to act risks a lasting period of painful economic stagnation. With the stakes high, Goolsbee has often taken positions that have failed to carry the day, or he has ratcheted down his prescriptions from the outset.
Last year, for example, he railed against the possibility of extending the tax cuts handed out to wealthy households by President George W. Bush. "We cannot afford to spend $700 billion on a policy that we know doesn't work, is the lowest bang for the buck, least effective thing that we could do to help get the economy growing," he said.
The administration put him front and center to elaborate that position, in a video appearance in which he toted a white board, underscoring his professorial credentials.
The White House then assented to extending those very tax cuts, arguing it was the only way to gain the votes of Republicans in Congress to extend emergency unemployment benefits.
By some accounts, Goolsbee is among those inside the administration who bear scars from their scrapes with Summers, whose take-charge mentality does not always leave room for polite differences of opinion.
Steven Rattner, President Obama's former auto czar, who administered the bailouts of major American car-makers, recounted one such episode in his book, Overhaul. During an audience with the president in March 2009, Summers took it upon himself to accelerate the announcement of a $5 billion credit guarantee for troubled auto suppliers, prompting a warning from Goolsbee: Such a message could convey the impression that the government was about to rescue the automakers as well. According to Rattner's account, Summers became irate:
As soon as the session adjourned, he cornered Goolsbee outside in the corridor and exploded, "You do not relitigate in front of the President!""I was not litigating in front of the President," Austan shot back. "He hasn't seen that program and it has nothing to do with the financial rescue." Larry felt that the freewheeling Austan was off base.
In Rattner's telling, this was only the beginning of Goolsbee's frustrations. "Austan continued to boil based on his impression that the views of the dissenters were not being reflected, a concern that would only grow in the coming days," he wrote.
Goolsbee reportedly tangled with Summers and his protege, Treasury Secretary Timothy Geithner, over how stringently to regulate Wall Street investment banks in the wake of the worst financial crisis since the 1930s. Goolsbee advocated aggressively for rules that would limit the rights of Wall Street firms to trade for the benefit of their own accounts, a measure that Summers and Geithner opposed. Their stance solidified their images among their critics as protectors of Wall Street, to the detriment of the public interest.
On this front, Goolsbee extracted a satisfying victory, persuading Obama to include the so-called "Volcker rule" (named after its chief architect, the former Federal Reserve chairman Paul A. Volcker) in the final version of the regulatory reform law adopted last summer.
As befits a man who has remained inside the administration, Goolsbee has generally spoken favorably of the economic policies administered on his watch. Even as millions of homes have been absorbed by the foreclosure crisis, and even as millions of people have lost work, he has spoken of a recovery taking hold, counseling patience. But his former colleagues, freed of public relations constraints, have testified with increasing stridence about the missed opportunities and internal squabbling that have largely defined economic policy in the Obama White House.
In a speech last month at Stanford University, Romer described an atmosphere in which compromise and and perpetual concern over the limits of political possibility reliably trumped consideration of the facts on the ground, and the need for a muscular governmental role in seeking to put Americans back to work.
"Like the Federal Reserve, the Administration and Congress should have done more in the fall of 2009 and early 2010 to aid the recovery. I remember that fall of 2009 as a very frustrating one. It was very clear to me that the economy was still struggling, but the will to do more to help it had died." (Hat tip to Ezra Klein for mining this speech.)
Romer pointedly rued the administration's failure to enact a more potent package of so-called stimulus spending measures even after Obama announced a fresh package in late 2009, featuring a tax credit aimed at encouraging employers to hire.
"Unfortunately, only a few of the additional measures were adopted," Romer said. "We got a version of our new jobs tax credit in the HIRE act. But, it was much smaller than what we had proposed."
Critics portray the current iteration of Team Obama as a club comprised of finance people who keep an eye out for the interests of major banks, while allowing elevated unemployment to become the New Normal, a problem that can be left largely untended. Romer is gone, and now Goolsbee is on his way out. Geithner, who ran the New York Fed in his previous incarnation, and oversaw the huge bailouts of the financial system, is still here. William M. Daley, the former J.P. Morgan Chase executive, now serves as Obama's chief of staff.
"I am worried that there are no economists that have any obvious standing with Obama left in the administration," said Baker, the Center for Economic and Policy Research co-director. "Geithner has a totally Wall Street perspective, as does Daley. Obama desperately needs someone to represent the rest of the country."
In recent times, Goolsbee has sounded -- at least in retrospect -- like a man who could not wait to depart Washington for any other place. He has watched Republicans in Congress threaten not to raise the nation's legal borrowing limit unless the administration assents to spending cuts, and he has indulged language that sounds disgusted.
“I don’t see why anybody’s playing chicken with the debt ceiling,” Goolsbee said in January during an appearance on ABC’s “This Week." “If we get to the point where we damage the full faith and credit of the United States, that would be the first default in history caused purely by insanity.”
Now, he is slated to depart, yet problems remain: the unemployment crisis, the deficit debate, worries about the housing market.
Someone new will step in and inherit those issues, but the sense has deepened among some observers that the political system is so consumed with partisan bickering that it is not up to delivering a fix, setting up Goolsbee's successor for what may well be another period of stress and unfulfilled reach.
"I think we're at a moment in the life of the administration when there is no more scope for economic policy," said the economist James K. Galbraith. "It's all smoke, mirrors, budget resolutions and the re-election campaign from now on. So the job of CEA Chair must be fairly thankless."
Staff Writers Janell Ross, Shahien Nasiripour, Sam Stein, Ryan Grim, and Nate Hindman contributed to this report.
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First Posted: 06/07/11 02:24 AM ET Updated: 08/06/11 06:12 AM ET