Obamagram: Economic Advisor Goolsbee

4/19/07

Hello Everyone, I promise to not inundate you with emails, but as I’ve done for the past several months, I try to keep my eye out for important news you may have missed and pass it along. Yesterday, the business section of the NY Times had an article on the various candidates’ economic advisers. That article appears below. As it reports, one of Barack’s principal advisers is University of Chicago economist Austan Goolsbee. As the highlighted section of the article indicates, and true to Chicago’s reputation, he is a true believer in free markets. I am happy to count Austan as a friend. I am also proud to say that Austan has recently joined the University’s Charter School Governing Board, of which I am a member. The board oversees the three charter schools on Chicago’s Southside which we started and operate as part of our large Urban Education initiative. So, Austan is also working directly on one of our great social problems – improving our urban schools. It is also worthwhile noting that Michelle Obama has served on UEI’s Policy Board. Good people doing good work. As always, please pass this along, Chuck

April 18, 2007

ECONOMIX

The Advisers Are Writing Our Future By DAVID LEONHARDT

In the late 1990s, a small team of economists began traveling down to Austin, Tex., for occasional visits with Gov. George W. Bush, then an unannounced candidate for president. The economists were mostly old Republican policy hands. The youngest member of the group — the only one who hadn’t worked for Ronald Reagan or Gerald Ford — was Glenn Hubbard, a Columbia professor in his early 40s. After Mr. Bush won, Mr. Hubbard went on to become the chairman of the Council of Economic Advisers and an architect of the tax cuts that — love them or hate them — have undeniably been the centerpiece of Mr.

Bush’s domestic policy. Mr. Hubbard was later responsible for bringing Ben Bernanke, then a professor at Princeton, into the Bush orbit. All of which is to say that the early advisers to presidential candidates can leave a big imprint. For the 2008 campaign, the six leading campaigns have each signed up their first-string economic policy teams. These advisers don’t hold the sway that the political aides do, but they can ultimately have a bigger effect on the world. If the next president is going to reform health care, attack climate change or address middleclass anxiety, the solution is going to be shaped by these policy advisers. As Douglas Holtz-Eakin, John McCain’s director of economic policy, says, “If you’re specific about what you want to do and you win, you have a mandate.” For now, the more interesting story is on the Democratic side. Among the Republicans, the three main candidates — Mr. McCain, Rudy Giuliani and Mitt Romney — all favor extending Mr. Bush’s tax cuts. That leaves the campaigns less room to propose other policies that cost money. It also makes it harder for the candidates to seem serious about the long-term budget deficit, a topic on which a number of the advisers, including Mr. Holtz-Eakin, the former head of the Congressional Budget Office, have been quite eloquent in the past. The Democrats, besides talking about a broader range of subjects, also have the freshest face among the top campaign advisers — Barack Obama’s lead economist, Austan Goolsbee, a 37-year-old star professor at the University of Chicago (who writes a monthly column for The New York Times). The two men met when Mr. Obama was teaching at the law school there, and they both seem to favor achieving Democratic goals through market-oriented policies. As Mr. Goolsbee has written: “Moral exhortation doesn’t change people’s behavior. Prices do.” Given their respective professions, the two are also more irreverent than you may expect: Mr. Goolsbee was once a member of an improvisational comedy group. But the biggest reason he got the job may simply be that many Democratic economists were already loyal to Hillary Clinton. Her team is dominated by former aides from her husband’s administration like

Roger Altman, an investment banker, and Gene Sperling, who worked his way up from serving as a campaign aide in 1992 to becoming a senior White House adviser. Dick Gephardt, the former House Democratic leader, is also working with Mrs. Clinton. Both the Clinton and Obama campaigns are now playing catch-up on policy ideas. John Edwards, who’s running third in fund-raising and the early polls, has tried to grab attention by releasing a series of specific proposals. Rather than bringing economists into his campaign, he is relying on a network of former aides from Capitol Hill to help him sort through ideas. (One Edwards proposal — on tax simplification — was originally Mr. Goolsbee’s, in fact.) To me, the most compelling question is how the Clinton and Obama campaigns will respond to Mr. Edwards’s health care plan. He wants to require companies that don’t cover their workers to pay into a fund. That fund, along with government subsidies, would cut the cost of insurance for families buying it on their own. He would then require all Americans to have health insurance. It’s a serious plan, one that resembles the law signed in Massachusetts by Mr. Romney, the former governor there. But lack of insurance is only one of the two big problems with health care in this country, and it may well be the smaller problem. Even among the insured, there is an enormous amount of inefficiency today. Some patients get expensive treatments that bring little benefit, while millions of others miss out on basic care, like cholesterol-lowering drugs, that would make a huge difference to them. Solving that problem will require changing the system so that it rewards good care not just any care. It will mean that Medicare and insurance companies must get tougher about saying no to $10,000 operations that haven’t been proven effective. Mr. Edwards’s white paper on health care includes some of these ideas, but he doesn’t emphasize them on the stump. And this is the sort of change that will require political leadership. Will Mrs. Clinton or Mr. Obama try to provide it? For that matter, will one of the Republicans? At this point, they are focused on taxes, a make-or-break issue for many Republican primary

voters. “We’re facing a gigantic tax increase,” said Michael Boskin, a top Giuliani adviser who, as an aide to George H. W. Bush, unsuccessfully tried to persuade his colleagues to take the 1990-91 recession more seriously. It’s conceivable that Mr. Romney may go even further than extending the recent tax cuts and propose new ones. His top economic advisers are Mr. Hubbard; Gregory Mankiw, a Harvard professor and former aide to the current President Bush; and John F. Cogan, a Reagan budget official now at Stanford. They like tax cuts. Mr. McCain, for his part, voted against both of the big Bush tax cuts. He said the first was too big and didn’t do enough to help the middle class, while the second was too expensive in a time of war. But because letting them expire would feel like a tax increase — and because Mr. McCain knows how his primary voters feel about tax increases — he supports them now. Eventually, though, the Republican candidates will talk about issues besides taxes. To deal with the budget deficit, they will have to come up with ideas for spending cuts. Nothing is a bigger long-term expense than Medicare, which will bring the debate right back to health care. The truth is that if you put the economic advisers, from both parties, in a room and told them to hammer out solutions to the country’s big economic problems, they would find a lot of common ground. They could agree that doctors and patients need better incentives to choose effective medical care. They would probably hit upon education policies along similar lines, requiring that schools be held more accountable for what their students are, and are not, learning. They might suggest a carbon tax — a favorite idea of Mr. Mankiw — to deal with global warming. And they would shore up Social Security by reducing benefits for high earners, as Mr. Hubbard has suggested. Not all of these ideas are politically feasible at this point, but presidential campaigns can change what’s feasible. Here’s hoping that this year’s crop of economic advisers has the courage of their convictions.