The oddest thing about the timing is this: Austan Goolsbee had so clearly won the power struggle.
(RELATED: Goolsbee to Leave White House)
Marginalized by Larry Summers in the first two years of the Obama administration, Goolsbee had come into his own in the scant eight months since he became chairman of the Council of Economic Advisers. Summers was gone, as was Goolsbee’s predecessor, Christina Romer. Even more than most CEA chairmen do, Goolsbee had emerged as the administration’s chief economic voice, appearing regularly on the Sunday talk shows.
But therein lay a deeper problem: the chief voice of what? Of policies that, frankly, no economist worth his Ph.D. would want to tout, occurring in an intellectual vacuum in which good economic thinking was no longer welcome. [See “Neo-Voodoo Economics,” NJ, 5/21/11, p. 20] During Goolsbee’s obscure first two years in Washington—when he mainly served as spokesman for the little-heeded Paul Volcker, the head of Obama’s largely cosmetic Economic Recovery Advisory Board—the administration had squandered its chance to do a deeper and more expansive stimulus, which was so clearly needed. And the opportunity didn’t come around again.
Goolsbee’s precise role in those early debates was not clear. What is known is that Goolsbee, an empiricist, had usually aligned himself with more progressive voices despite his tenure at the University of Chicago. He is believed to have sided with Volcker on the tougher regulation of Wall Street and economist Joseph Stiglitz and others on the need for much more stimulus. But “I didn't have much influence and neither did Austan,” Volcker told National Journal on Tuesday.
Today, all those hopes are gone with the wind of the tea-party movement. The GOP is in charge of the House and the tea partiers, despite being a minority faction of a minority party, are effectively dictating Washington’s economic agenda, which is focused only on cutting spending despite the wavering recovery. The Republicans are also intent on obstructing the Dodd-Frank regulatory legislation, meager though it already is.
The inmates have taken over the asylum, in other words, and Mr. Goolsbee is simply ducking out the back door for his own safety. The numbers on jobs, housing, and manufacturing are scary, as are the “headwinds” from abroad, particularly Europe and Japan. But there simply is no room left for a real economic discussion about remedies. The Treasury and Fed both have had their day. The economy, limping along with 9.1 percent unemployment, will have to fend for itself.
Nor is Goolsbee’s replacement – the CEA chairman is expected to leave in August – likely to make much of a difference. A White House spokesman said on Tuesday that while names are still being “sorted through,” the choice “will most likely be an academic economist. I don’t think it will be a flagship name.”
The official reason for Goolsbee’s announced resignation is that he wanted to retain his tenure at the University of Chicago’s Booth School of Business. “Staying on would have meant another two years, since next year runs into the 2012 election, and he couldn’t leave then,” a Goolsbee aide said. There is something to this. Alan Friedman, a spokesman for the Booth School, told National Journal that “in normal circumstances, academic leaves of absence are approved for no more than one year,” though “exceptions are sometimes made, in particular for government service.” Goolsbee has been gone for almost three years.
Still, whether he’s been pressured to get back or not, he probably can’t wait. Yes, Goolsbee has ably defended the administration’s policies before the cameras. (“It’s not a jobless recovery!” he spluttered on ABC’s This Week on Sunday, even though the unemployment rate was 7.8 percent when Obama took office, before the Great Recession reached its height.) Behind the scenes, though, he has been somewhat acerbic about the backwardness of the economic conversation in Washington. He was surprised by the persistence of so much old thinking about macroeconomics — that neither fiscal-stimulus nor monetary-expansion measures such as quantitative easing work. He has had to dicker with those on the Right who still marry themselves to the supply-side idea that lower taxes will increase revenues, despite what he knows is three decades of economic debunking.
Goolsbee remains a passionate Obama loyalist, but it’s just no longer fun when you can’t practice your livelihood.