Obama economic team shifts from left with Goolsbee appointment

President Obama’s economic brain trust is taking a small
step to the right with Austan Goolsbee’s appointment as head of the White
House Council of Economic Advisers.

Goolsbee would replace Christina Romer, a leading voice from
the left on Obama’s economic team. Because he has been a member of the council,
Goolsbee does not have to go through a Senate confirmation.

{mosads}Goolsbee, a former professor at the University of Chicago,
had been the favorite to succeed Romer since she announced in August she would be
returning to academia. But he’s considered slightly less liberal than both
Romer and Laura Tyson, whose name surfaced as another potential CEA chairwoman.

A supporter of free trade, Goolsbee once called himself a
“free-market type” in a column for Slate. As a campaign adviser to Obama in
2008, he told Canadian officials that Obama didn’t plan to reopen the North
American Free Trade Agreement (NAFTA) despite Obama’s criticism of it as a
candidate.

Trade is expected to be a big issue for Obama in the
remainder of 2010 and in 2011. The president wants to move a trade pact with
South Korea through Congress, and if Republicans re-take the House, it could be
a point of convergence for the administration and a Republican Congress.

Goolsbee’s positions could provoke some backlash from the
left, which already is disappointed with the administration over several
issues.

He also opposed a federal bailout of U.S. auto companies
last year, something progressive groups supported. The president signed off on
that move and has repeatedly defended it in recent weeks.

While Goolsbee’s promotion may not represent a huge change
to the president’s economic policies, it could signal the White House isn’t
going to propose the kind of bolder measures that liberals have sought to
stimulate the economy, said Dean Baker, co-director of the left-leaning Center
for Economic and Policy Research.

Baker identified Jared Bernstein, the chief economic adviser
to Vice President Biden, as the only progressive in the president’s inner
circle of economists.

“And it’s clear that he is in the outer ring of the circle,”
Baker said. “It seems that the administration is prepared to live with very
high rates of unemployment for long periods of time. I understand the
difficulty of getting anything through Congress or forcing the Fed to take more
aggressive action, but this could be a clear political divide with the
Republicans.”

Goolsbee’s appointment should be well received by the
business community, said Jim Kessler, vice president for policy at the
center-left think tank, Third Way. Obama has seen his relationship with
business groups chill during debates over reforming healthcare and Wall Street.

“He believes government needs to make investments to make
the economy grow,” said Kessler. “He does believe in private-sector growth,
the power of private markets.

“For businesses, if they’re following this, it should give
them confidence,” Kessler added. “I do think one of the challenges for the
Obama administration going forward is to generate more confidence in the
economy because there’s a real psychology to the markets, not just the stock
market, but when boardrooms decide to invest in plant equipment and hire.”

Romer was known as the member of Obama’s economic team most
interested in pushing for a larger stimulus measure to support the economy.

In early 2009, she supported a stimulus package larger than
$1 trillion. Congress passed and the president signed a $787 billion package
instead. (The stimulus’ cost has since been revised to $814 billion by the
Congressional Budget Office.)

Romer has called for more stimulus spending this summer, as
has Tyson, a CEA chairwoman in the Clinton White House.

Above all, Goolsbee is seen as a pragmatist whose arguments
are driven by data. And he does have fans on the left.

Proponents of Social Security have pointed to his 2004
paper, in which he argued that President George W. Bush’s Social Security
reform plan would be “the largest windfall gain in American financial history.”

Goolsbee wrote that letting people shift Social Security
payroll taxes into private investment accounts, as Bush proposed, would result
in a “massive increase” in fees for taxpayers that would go to mutual fund
companies.

Goolsbee is also considered to be a good economic spokesman
for the administration.

He has already shown a willingness to engage his critics as
CEA chairman. After the liberal blog Eschaton noted this week that he once questioned
the efficacy of business investment tax credits — which Obama called on
Congress to pass this week — Goolsbee on Friday e-mailed the blog to say why
his position isn’t at odds with the president’s.

Goolsbee told the blog that his argument against the tax
breaks came in 1997, when the economy was much different.

“[T]he findings in my old work would clearly indicate there
would be little reason to expect the increased demand to go into higher
prices,” Goolsbee said. “Investment subsidies at a time like this could
generate significant amounts of investment.”