November 8, 2007 Bending Ears on Economics as ’08 Nears By LOUIS UCHITELLE
On the campaign trail, Barack Obama and John Edwards are aggressively pitting themselves against Hillary Rodham Clinton in the race for the Democratic presidential nomination. But when it comes to something as fundamental as economic policy, the lineup quietly shifts: It is Senators Obama and Clinton against Mr. Edwards.
The shift is evident in the candidates’ senior economic advisers. While both Mrs. Clinton and Mr. Obama have turned to moderately progressive advisers to help them elaborate their own preferences, Mr. Edwards is charting a different, more populist course.
“If you want to have some esoteric debate about economic theory, you end up justifying free trade or supply side economics,” said Leo J. Hindery Jr., a cable-television entrepreneur now engaged in private equity who is serving as Mr. Edwards’s top adviser on economic issues. “What we do for Edwards,” he said, “is give him policy advice based on specific concerns that he has.”
This is not the 1960s, when Walter Heller famously instructed John F. Kennedy in Keynesian economics, or the late 1970s, when Arthur Laffer popularized supply-side economics as Ronald Reagan ran for office — each gaining fame as a teacher of presidents.
“The field of economics has changed enough so that grand theories don’t have the avid adherents they once did and that has undermined the role of the guru/tutor,” said Austan Goolsbee, an economist at the University of Chicago’s Graduate School of Business. “Now it is, ‘Let’s bring in experts on specific issues, like housing or trade or wages.’”
Mr. Goolsbee is the senior economic adviser to Mr. Obama and the only Ph.D. economist among the top advisers on the Democratic side. The names on the door at Mrs. Clinton’s headquarters include Gene B. Sperling, a lawyer by training who was national economic director in Bill Clinton’s second term as president, and Roger C. Altman, a Wall Street investment banker who served in the Clinton Treasury.
The four leading Republican candidates, by contrast, have appointed professional economists as their senior advisers, all of them veterans of the current Bush administration or the administration of President Bush’s father. They generally embrace the president’s laissez-faire economic policies, as do the candidates they support.
Democrats agree on some fundamentals of their own, among them allowing the president’s tax cuts to expire for those in higher income brackets and embracing universal health care to cover the tens of millions of uninsured Americans.
But as the prospects improve for a Democrat to capture the White House, divisions are emerging as well, mainly over trade and budget deficits. While Mr. Edwards attacks the trade agreements now before Congress, Mrs. Clinton and Mr. Obama tend to support them. Mr. Edwards also pushes for public infrastructure spending even if that means more deficit spending than the two senators endorse.
The Republican candidates, showing their unity on economic policy, would extend the president’s tax cuts rather than let most of them expire in 2010 as the Democrats prefer. They endorse free trade with none of the restrictions that Democrats now seek.
Regarding health insurance, they would keep government involvement to a minimum, shunning the elaborate plans the Democrats have proposed. For them, public investment would be mostly devoted to making repairs to the nation’s infrastructure, not expanding it, as the Democrats say they want to do.
“All of the Democratic presidential candidates are significantly to the left of us on economic policy,” said R. Glenn Hubbard, dean of Columbia University’s Graduate School of Business and the first chairman of President Bush’s Council of Economic Advisers.
Mr. Hubbard is now in Mitt Romney’s corner as senior economist. Douglas Holtz-Eakin, director of the Congressional Budget Office in the early Bush years, is advising Senator John McCain. Michael J. Boskin, the top adviser to Rudolph Giuliani, served President George H. W. Bush as chairman of his Council of Economic Advisers, while Lawrence B. Lindsey, who was the current president’s chief economic adviser at the start of his administration, is now Fred Thompson’s senior economist.
The senior advisers, with their prestige and stature, are the public faces of economic policy for the presidential candidates — Democrats and Republicans alike. But they are also on a leash. The paid staff members in each campaign have a lot to say, and considerable control.
Mr. Hindery, for example, postponed an interview until he had clearance from James Kvaal, policy director for the Edwards campaign. And Mr. Sperling, for all his political prominence, declined to be interviewed, even off the record, until he had clearance from Mrs. Clinton’s policy director, Neera Tanden. Later, Mr. Kvaal and Ms. Tanden called to go over positions.
“We should be trying to balance the budget,” Mr. Kvaal said, but he bridled at the Clinton camp’s emphasis on moving promptly to eliminate the deficit. “Investments in health care, energy and education,” he said, “are more important for our economy, even if that means sustaining the deficit for a while.”
Among all the senior economic advisers in both parties, only Mr. Goolsbee, a relative newcomer to politics, spoke on the record and without advance clearance. Ask him how he got his position with Mr. Obama’s campaign, and he cites friends in common who steered the candidate and the economist toward each other at the University of Chicago, where both taught. Mr. Obama was running for the Senate at the time.
“He and I saw eye-to-eye on economic stuff,” said Mr. Goolsbee, who describes himself as a centrist. (He also is a contributor to The New York Times.)
One of the crucial jobs for the senior advisers is to consult with a variety of experts, most of them economists, on specific issues: trade, family income, public investment, wage inequality, health insurance, poverty, education, and the like. Many in this pool give advice to all three Democratic front-runners.
“We end up consulting a lot of the same people,” Mr. Goolsbee said.
One of those is Jared Bernstein, a senior economist at the labor-oriented Economic Policy Institute and an expert on income and wages. These are big issues in a primary campaign that focuses on what the three Democratic candidates perceive as a rising angst among voters suffering from income stagnation, job insecurity and foreign competition. While Mr. Bernstein’s favorite is Mr. Edwards, he nevertheless sees himself as supporting whoever finally gets the nomination.
“Everybody knows that you drift to the left in the primaries and to the center for the general election,” Mr. Bernstein said. “It is a matter of degrees and everyone, including myself, has to build a sense of how earnest these candidates are. I think they are all very sincere.”
Many of the others advising one or another of the Democratic candidates say it is their intention, too, to support the eventual Democratic nominee, despite the differences that are developing over trade, public investment and balancing the budget.
Mr. Sperling, for example, argues that while public investment is important, so is cutting the deficit. The late ’90s boom, Mr. Sperling said during a recent panel discussion, might never have happened if the Clinton administration had not managed to push through the tax increases and limits on spending that helped turn the deficit into a surplus.
“We are trying to strike a balance” between fiscal discipline and public investment, he said — taking a position that Mr. Obama seems to share, but not Mr. Edwards.
The division widened after Mr. Edwards issued a statement on Oct. 27 strongly opposing a trade agreement with Peru, now before Congress. He declared that the Nafta-like agreement, among other aspects he found objectionable, “created incentives to relocate jobs overseas.”
Less than a week later, the House Ways and Means Committee approved the agreement and Representative Sander M. Levin, a Michigan Democrat who is chairman of the trade subcommittee, called the vote “a historic breakthrough” because the agreement “for the first time incorporates international worker standards.”
Mrs. Clinton and Mr. Obama, in contrast to Mr. Edwards, cite enforceable labor standards as a good reason to support a trade agreement, including the one with Peru.
Robert E. Rubin, the former Treasury secretary in the Clinton administration, and still the éminence grise of the party’s Clinton wing, favors the Peru agreement. Mr. Rubin, named chairman of Citigroup last Sunday, has stated that he would like to see Mrs. Clinton become president. He will make some campaign appearances with her before year’s end.
His stature will make him the de facto senior economic adviser in the Clinton campaign. But if Mr. Obama wins in the primaries and gets the nomination, Mr. Rubin would migrate to the Obama camp. His son, James Rubin, already works with Mr. Obama.
Mr. Edwards, as far as Mr. Rubin is concerned, is another matter. He has no links to the Edwards camp, and their differences over budget balancing and trade agreements keep them apart.
Some of the experts consulting with the various Democratic candidates might follow Mr. Rubin’s lead, shunning the Edwards candidacy. Right now, the list of floaters includes Alan Blinder, a former Fed vice chairman, and Alan Krueger, both at Princeton; Lawrence Katz and Elizabeth Warren at Harvard; Jacob S. Hacker, author of “The Great Risk Shift,” at Yale; Thea Lee, a trade expert at the A.F.L.-C.I.O.; and Kenneth E. Thorpe at Emory University.
A few work with only a single candidate: Clyde V. Prestowitz of the Economic Strategy Institute is aligned with Mr. Edwards, for example. Mr. Goolsbee regularly consults with Jeffrey Liebman and David Cutler at Harvard, who back Mr. Obama. Laura D’Andrea Tyson, a former top economist in Bill Clinton’s administration, now back at the University of California, Berkeley, gives advice to the Clinton campaign. David and Christina Romer, also at Berkeley, consult only with Mr. Obama.
Those in the background giving advice to one or more of the Republican candidates include N. Gregory Mankiw at Harvard, who is aligned mainly with Mr. Romney; Richard Clarida at Columbia; James L. Sweeney and John F. Cogan at Stanford; David Malpass at Bear Stearns; and Kevin A. Hassett at the American Enterprise Institute, working principally with Senator McCain.