The news of Larry Summers's departure as director of the National Economic Council by year's end has everyone poring over the tea leaves. Whom will President Obama appoint to replace him and what will that choice mean?
The decision is an awkward one for the White House, which is already indicating that it doesn't want to be rushed. The brutal truth, rammed home by this week's televised town hall, is that Obama is losing the economic--and hence the political--argument. Unemployment remains stubbornly high at 9.6 percent. Summers's signature initiative, the $787 billion stimulus, is widely viewed as not having done enough (Summers fought behind the scenes for a larger package). Yet the more the administration spends, the more it stands accused of compounding the deficit without anything to show for it. Right now, Obama is flailing with his economic message, and polls suggest that, as a result, the GOP has a good chance to retake both houses of Congress in November.
Everyone has a different idea who would make a good replacement for Summers. With Obama off his game, he sorely needs a top-notch communicator, someone who can make the case for the administration's economic policies and sell a clear message over the din of Tea Party vitriol. Treasury Secretary Tim Geithner has been little help on this front, and with the resignation of the down-to-earth Christine Romer as the chair of the Council of Economic Advisers, the need is acute.
Then there's ideology. Progressives, never comfortable with Summers, fantasize about Obama turning left by picking someone in the mold of Clinton Labor Secretary Robert Reich or Nobel Prize winner Paul Krugman. Equally, Obama faces pressure from the business community to pick a CEO with real-world experience in creating jobs. This might temper, if only briefly, the persistent criticism that the administration is filled with ivory-tower elitists bent on an ideological jihad against Wall Street. Such a choice would also signal a possible Obama attempt to "triangulate" to the center if, as expected, this November's election results in a more conservative Congress. Remember, too, that the president's bipartisan debt commission is scheduled to release its recommendations shortly after the midterms. Obama may want a more centrist, business-oriented pick to fit the new climate.
Finally, and perhaps decisively, there is the matter of gender balance. The upper echelons of the president's economic team—with Austin Goolsbee replacing Romer and Jacob Lew replacing Peter Orszag as head of the Congressional Budget Office—are stacked with men. So the smart money is on Obama choosing a woman. After that, he has a stark choice: go with an economist, as more obviously befits the responsibilities of an NEC director, whose role is to interpret data and coordinate policymaking, or look seriously at candidates with a successful track record in business.
Here are some of the most likely possibilities:
She's a widely respected economist and poverty expert from the Commerce Department, where she oversees the Census Bureau and the Bureau of Economic Analysis. Blank formerly served on the Council of Economic Advisers under President Clinton, and she'd be another solid option if Obama is looking to replace Summers with a policymaking brain as opposed to a business-focused one.
Obama is known to be impressed with Vice President Joe Biden’s chief economic adviser. He’s already on the team, knows where the bodies are buried, and would be better placed to grab the president’s ear than an external candidate. But Bernstein would be a target for conservatives—along with Romer, he predicted that the original stimulus would keep unemployment below 8 percent. So this would be a defiant pick, doubling down on the administration’s current thinking.
Farrell is Summers's deputy National Economic Council director, presumed to be in the running along with her codeputy, Jason Furman. She would blend both public- and private-sector experience, having come to the White House from consulting firm McKinsey & Co. and, before that, Goldman Sachs. However, Farrell is viewed with suspicion by some on the left for her fervent advocacy of overseas outsourcing, which is hardly a distraction the administration needs right now.
Another female CEO who is gaining traction as a contender, the accomplished Fudge is a former Kraft executive, CEO of Young and Rubicam Brands, and current director for GE, Unilever, and Novartis. The Obama administration recently appointed her as one of two CEOs serving on the bipartisan debt-reduction commission, indicating that she's high on the White House's radar. At the same time, elevating someone who sits on the board of a major pharmaceutical company may not be the best move imagewise. She's currently a 5–2 favorite on betting Web site Paddy Power.
Mulcahy is the former chief executive of Xerox Corp. and currently also serves on the president's Economic Advisory Board, where she is said to have impressed White House officials. Her chances are being talked up by conservative outlets, including today's Wall Street Journal, which picked her as a frontrunner. She also has the endorsement of Andrew Samwick, chief economist for President George W. Bush. Mulcahy was spotted having dinner in Washington, D.C., last Friday with senior Obama adviser Valerie Jarrett—make of that what you will. Some suggest her management (as opposed to economic) expertise would make a better fit for a cabinet post in a department such as Commerce or Health and Human Services.
Parsons is one of a number of male CEOs whose names are being bandied about (another is Jeffrey Immelt of General Electric) for the role. He's is the current head of Citigroup and a former head of Time Warner AOL. The administration may be keen to counter the criticism that it’s antibusiness, but one wonders how much political mileage selecting Parsons would get the White House. In the current environment, recruiting a big banking honcho to the economic team could easily spark public outrage.
Arguably Obama's best choice if he prefers an economist. Tyson, a veteran of the Clinton administration, is a member of the president's Economic Recovery Advisory Board, an outside panel of economic experts consulting with Obama. She is also a professor at the University of California, Berkeley's Haas School of Business, and a strong supporter of industry and manufacturing. Tyson's support for greater stimulus spending and other qualifications would make her appointment well-received in liberal circles.