Investing

Outlook 2011: Obama's Search for New Economic Adviser

It would be difficult to come up with a more polarizing figure than departing director of the President’s National Economic Council, Larry Summers. Never known for his diplomatic skills, Summers has alienated just about everyone he has dealt with, even those who think he has done many things correctly.

In October, when Summers announced that he was returning to his professorship at Harvard, speculation about his successor as director of the NEC went into second gear. Now, as an announcement date is getting nearer, speculation is shifting into a higher gear.

There are a number of possible appointees being discussed. Among the most prominently mentioned are investment banker Roger Altman, a former Clinton Administration adviser; Yale University president Richard Levin; Treasury department counselor Gene Sperling; and deputy director of the NEC, Jason Furman.

The interesting thing about the coming appointment is whether or not the president will stick by his earlier intention to name a business leader to the post. When Summers announced his resignation, the president’s credibility with the private sector was probably at the lowest point it’s been in his two-year-old administration. President Obama needed to get back on the good foot with Wall Street and Main Street.

Since then, though, the president’s stock seems to have gone up with business leaders, especially following his meeting with business leaders earlier this month. Perhaps he could find a different position inside his administration for a business leader.

When the president needed to replace departing budget director Peter Orzag and Council of Economic Advisers chair Christina Romer, he appointed administration insiders to the jobs. That bodes well for Sperling, who is an outspoken deficit hawk, and who might have an easier time communicating with the more conservative Congress that will be sworn in next month.

If an outsider is wanted, Altman and Levin both have solid records. Altman was a partner at Lehman Bros. in the mid-1970’s, an assistant secretary of the treasury under President Reagan, vice-chairman of the Blackstone Group, deputy treasury secretary under President Clinton, and now founder and president of a private equity firm.

Levin has been president of Yale University since 1993, and has been a member of its economics faculty since 1974. Levin is a more firmly committed liberal than Sperling, or for that matter, Summers. He has supported both a larger original stimulus package and a second dose of stimulus as necessary to get the US economy going again. In a speech at Yale, he argued against tax cuts as effective stimulative actions and said, “The stimulus package should have been all direct job creation and not tax cuts.” Given that the new tax reform legislation is all about tax cuts, Levin’s point of view may have already been overruled.

This short list is certainly not inclusive, but these are the names that are most often bandied about as the new NEC director. The most interesting appointment would be Altman, a Wall Street insider who would drive the president’s progressive supporters nuts but would also unsettle conservatives who probably doubt his dedication to the cause because of his work for Clinton.

The responses to any other appointment from this short list would be drawn right along party lines. If the president’s recent tack to the right is any indication, he is unlikely to look to the left — and he is just as unlikely to look to the right. Altman looks good from here.

Paul Ausick