How many economic-advice-giving organizations does it take to run a White House?

MarketWatch reports:

President-elect Barack Obama tapped former Federal Reserve Chairman Paul Volcker to run a new White House advisory board tasked with offering independent advice about how to stage an economic recovery.
Obama named the 81-year-old Volcker to head the President’s Economic Recovery Advisory Board….

The board is modeled on the Foreign Intelligence Advisory Board that gave President Dwight Eisenhower independent opinions on intelligence issues. Austan Goolsbee, another key Obama adviser, will serve as the economic board’s staff director and chief economist.

Volcker can be single-handedly credited with ending the great inflation of the 1970s, and has been critical of the unorthodox steps that Fed Chair Ben Bernanke has taken to address our current challenges. Although I share some of Volcker’s concerns, it is not clear to me what specifically Volcker would propose to do instead. Certainly the policy for which he is famous and justly praised– stopping inflation at all costs– is seriously contraindicated at a time when we just saw the biggest recorded monthly drop in the CPI. A policy of real toughness in dealing with failed financial institutions has some appeal to me, and Volcker may be the sort of person who could insist on that, if given some real power. But is that what Volcker and Obama have in mind?

Chicago Professor Austan Goolsbee is very bright and certainly has my respect. Given his important role in the campaign, it’s hardly a surprise that his voice will play a major role in shaping economic policy. But Time’s Justin Fox worries about “economic-adviser gridlock”, and David Cho and Alec MacGillis warn in the Washington Post of the

central leadership challenge the president-elect will face: how to manage a stable packed with big brains and bigger personalities — and how to make decisions when those high-powered experts disagree.

There was already some inherent ambiguity and conflict as to what the respective contributions and roles would be for Larry Summers at the National Economic Council, Christina Romer at the Council of Economic Advisors, Tim Geithner at the Treasury, and Peter Orszag at the Office of Management and Budget. Greg Mankiw shares some insights from his experience inside the White House. But based on my knowledge of those four, I could imagine them working together very effectively.

What I’m less clear about is how creating yet another separate advisory group is going to facilitate that. Fortunately Justin Fox has come up with a solution to the potential problem: Obama just needs to appoint Jason Furman to run the “Coordinating Council of Economic Advice-Givers”.

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Paul Volcker

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