VIEWPOINTS : Top Economic Advisers Reduced to Bit Players

The Council of Economic Advisers has fallen on hard times. Its public standing was recently highlighted by the response to the announced resignation of its latest chairman, Beryl W. Sprinkel. Who, many wondered, is Beryl Sprinkel?

In recent years, the council and its chairman have ceased to play a major role, public or private, in the development of economic policy. Certainly, this is a long fall from the 1960s, when the council joined with the Treasury Department and the Office of Management and Budget to form a troika that dominated the flow of economic advice to the President and Congress.

The current obscurity and irrelevance may prove temporary. The council’s role always rises and falls with the importance that the President attaches to it. It has no program responsibilities and exists simply to offer economic advice to a president.

As the late Walter Heller, its most influential chairman, once said, the CEA is a consulting firm with one client. Since President Reagan is an uninterested client, the council is left with no function.

Economic Verisimilitude

In fact, it was reported that the President was prepared at the beginning of his second term to recommend elimination of the council. Apparently, he was dissuaded from such actions because the option of having a council should not be foreclosed to a future president and the council was at times useful to lend an air of economic verisimilitude to an otherwise bald and unconvincing policy.

In many respects, the current low status of the council reflects a long-term trend. In the 1960s, the council was one of the few centers in government that sought to apply economic analysis to issues of public policy. The other agencies were often overwhelmed in the debate over policy options by their lack of economic knowledge and by the jargon for which economists are so infamous.

These other agencies, however, were fast learners, and by the mid-1970s nearly all of them had hired their own economists even as the terminology of economics had become part of the general collection of buzzwords in Washington.

In most respects, the spread of economic analysis throughout the various levels of government has been beneficial. While the economic perspective does not, and should not, control the outcome of public policy decisions--an inherently political process--the economic consequences of alternative policy actions are considered in greater detail and are better understood than in the past.

Hired Guns

The agencies, however, also found that economists could be useful in promoting the interest of the constituencies they represent. The agencies have learned that economists function well as hired guns, who could usually fight the council to an inconclusive draw.

I remember meetings in the government that came to an end when a major participant rose to announce that the subject under discussion was not an economic issue--”the economists cannot even agree among themselves”--and that the decision could be based on a straightforward consideration of the political gains and losses.

Today, there is a greater perception that economic analysis does not lead inexorably to the “right” answers. It is instead a means of formulating the arguments on both sides of an issue. It may have raised the level of debate, but it certainly has not eliminated it.

This dispersal of economic analysis has its counterpart on the congressional side, where the sister organization of the CEA, the Joint Economic Committee, has also faded into oblivion. Now, Congress also has many different organizations that provide it with economic analysis and the arguments on different sides of issues--the Congressional Budget Office, the Congressional Research Service, the General Accounting Office and the staffs of various House and Senate committees. All of these organizations have either been created or have greatly expanded their staffs of economists in the last 20 years.

The decline of the Council of Economic Advisers also reflects the conditions of a profession that has splintered into different camps on the issues that dominate the current macroeconomic policy discussion. Nowadays, economists come affixed with a label, such as supply-sider, Keynesian, monetarist, classicist. And there is a large category of issues for which knowing the label is enough to know the conclusion.

Consensus of Opinion Impossible

Presidents are told that economic issues are complex and that they should hire advisers to aid them in their decisions. Most do. In fact, they hire four or five. But each president is then faced, on any given issue, with a cacophony of four or five opposing points of view, with no obvious basis on which to determine who is right. No Council of Economic Advisers can claim today to represent a “consensus” of the economics profession.

Most academic economists have little interest in, or knowledge of, the real-world economy and the political system within which government policy decisions must be made. Modern economics, with its emphasis on narrow theories, abstract models and “stylized” facts, has less and less to do with real-world issues.

It may be that the Council of Economic Advisers, with its historical practice of bringing in academic economists for relatively short stays in government, has outlived its usefulness. It simply takes too long for its members to become sufficiently knowledgeable about the issues to participate in a meaningful fashion; they have become the amateurs.

The council played an important historical role in stimulating the use of economic analysis in government decision making; but, today, such analysis has spread throughout the government, and the council is no longer unique.

Fragmented Advice

The major problem with economic policy in the executive branch is not the lack of advisers but rather the fragmented nature of the advice that the President receives. He is, in fact, forced to become his own economist simply to choose among the conflicting options with which he is presented.

It is important that future presidents be exposed to the analytical viewpoint that a Council of Economic Advisers provides and that such advice be unfettered by the constraints of the special-interest perspectives of the other agencies. It is unrealistic, however, to expect that the council will return to the dominating position of an earlier period. Finally, the existence of a council does not solve the more fundamental problem of a fragmentation and lack of overall cohesiveness of the policy advice that presidents receive.