The departure of Larry Summers

September 22, 2010

So who is going to replace Larry Summers over at the White House? My Reuters colleagues list a number of options. I have come up with a number of my own over at Twitter. (The WH would love a female CEO as director of the National Economic Council, methinks.) Anyway, here is my Reuters Breakingviews column on the the impending Summers exit:

If deftly handled, the exit of brilliant-but-testy White House economic adviser Lawrence Summers could be addition by subtraction. Summers’ departure for Harvard University gives President Barack Obama an opportunity to fill a gaping hole in his administration’s skill set: private sector experience.

Businessmen, both big and small, would be thrilled to see the next director of the National Economic Council – a key role in the country’s economic leadership – drawn from their own ranks. Executives have repeatedly knocked Team Obama for overweighting academics and government apparatchiks over folks who’ve met payrolls and earned profits. Summers’ two year stint as an adviser at hedge fund D.E. Shaw made him one of the few members of the Obama White House with “real world” experience.

Certainly such a move would make it a bit less likely that president would, as he did at Monday’s town hall meeting, have to reassure Corporate America that he believes making a buck isn’t morally inferior to community organizing.

But such a decision could have policy implications as well. A CEO in the vicinity of the Oval Office might point out the risks of regulatory overhaul amid economic uncertainty. Or he/she might highlight how higher taxes can alter the risk-reward calculations of business owners and investors. Just having someone in the West Wing that business sees as offering a sympathetic ear might be enough to spur détente.

But the significance of the position shouldn’t be overstated. Traditionally, the NEC director is a coordinator more than an idea generator. In that way Summers has been something of an anomaly. He served as Obama’s maximum economist in 2009, designing the stimulus plan, helping steer financial reform and keeping a watchful eye on markets.

During the past year, though, there’s been a sneaking suspicion with the November midterm elections approaching that more policy is being conducted by the Obama political gurus than the financial guys. If so, that power shift may continue as the president continues positioning himself for a possible 2012 reelection campaign.

Still, with the economy clearly the top priority of voters, Obama’s pick to replace Summers will be given plenty of symbolic weight. And with business still nervous about taxes, deficits and regulation a friendlier face would be a way for him to sound the “all clear.”

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