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Tuesday, August 10, 2010


Keith Hennessy, who headed the National Economic Council (NEC) under President George W. Bush, explains how NEC differs from the Council of Economic Advisers (h/t Byron Koay):

It’s easy to confuse the very different roles of the NEC and the CEA.

The NEC Director (Summers) runs the economic policy process. It’s a process management role. When an economic policy issue needs a Presidential decision, the Director of the NEC manages the process within the White House and the Executive Branch that ultimately results in a Presidential decision. Policy council staff run many meetings and conference calls.

The NEC Director generally has an advisor role and an honest broker role. The advisor role is the high visibility one that everyone thinks is fun: you get to tell the President what you think he should do on every economic policy decision he needs to make.

The honest broker role consumes much of the NEC Director’s time. Each week the NEC Director and his or her staff of about twenty run dozens of meetings and conference calls of senior Administration officials to discuss and debate policy questions, gather recommendations, and ultimately advise the President. In my view, the best NEC Directors were the ones who would not impose their own policy views on this decision-making process, but instead would let the 5-20 other senior advisors to the President slug it out. The NEC Director would make sure the debates were informed by accurate information, solid policy and legal analysis, and rigorous logic and strategy. If a Cabinet Secretary or a senior White House staffer thinks that the NEC Director is going to prevent the President from hearing his or her advice, or that the NEC Director has his thumb on the decision-making scale, then that Cabinet official or White House staffer will often seek a back channel to bypass the decision-making process and provide unfiltered ex parte input to the President. The President has to deal with so many issues and so many decisions that if this NEC-led process breaks down, the wheels eventually come off.

In addition to whatever personal skills and abilities he or she brings to the job, most of the NEC Director’s power comes from his or her proximity to the President (physically, bureaucratically, and sometimes personally), from the breadth of his turf, which covers all economic policy, and most importantly from the reality that he or she runs the meetings and controls the paper. If the NEC Chair is effective and perceived as fair by other members of the President’s economic team, he also gains power from other senior advisors who want to help the NEC policy process succeed, even when they sometimes disagree with the President’s decisions.

The CEA Chair (Romer) is the leader of a team of three Members of the Council of Economic Advisers. One CEA chair described CEA’s role as an internal economics consulting shop within the White House. The CEA Members all have economics PhDs and always come from an academic background, as do most of their senior staff economists. The senior staff economists generally take a one year leave of absence from their academic positions at universities. Junior staff economists are often non-tenured young academics or newly-minted PhD’s. Some of the staff economists are detailed from other government agencies.

The CEA chair and staff manage all the economic data statistics for the President and prepare memos for him which explain the data. They analyze the economics of policy options, help design those options, and help critique other options. They spend a lot of time explaining economics and educating the President, other members of the economic team, other Presidential advisors, and the public about the basic economic facts and logic that underlie every policy question.

Therefore NEC does economic policy and decision-making, and CEA does economics. They’re different. CEA staff apply economic theories and data to economic policy, while NEC staff operate at the intersection of economics, policy design, the law, communications, politics, strategy, and the practical aspects and constraints of legislating and managing a bureaucracy.