BIDEN TRANSITION | Economic Team (Guest Post by Dana Chasin)

The following guest post, on the President-Elect's economic appointments so far, is by Dana Chasin of 20/20 Vision in Washington, D.C.  A fuller list of senior Biden appointees, and some contenders for unfilled positions, may be found here. The list is regularly updated.  

Biden’s intent to gather a progressive coalition, perhaps the most diverse in history, is manifest. Janet Yellen was appointed last week as Treasury Secretary. Yellen would be the first woman to fill this position, if she is confirmed. 

Now Biden has chosen to fill out much of his economic team with five talented, experienced policy advisors and researchers. Several of them would also be historic firsts in their roles. However, confirmation struggles loom. 

Neera Tanden (OMB Director). If confirmed, Neera Tanden would be the first woman of color to head the Office of Management and Budget (OMB) in history. Tanden, a longtime Clinton ally and mainstay on cable news, helped found the left-leaning Center for American Progress in 2003 and is its current Chief Operating Officer. Her policy specialty is healthcare, having successfully helped draft the Affordable Care Act and shepherd it through Congress. More recently, her focus has been on the COVID pandemic and its economic fallout. New Jersey Governor Phil Murphy named Tanden to the state’s Restart and Recovery Commission this past April. OMB is a giant executive branch agency, in charge of evaluating performance of federal programs and policies, ensuring they align with the White House’s budget and priorities. Tanden is perhaps the most controversial of nominees put forward by the Biden team so far, never mincing words while critiquing both the right and far left. Her confirmation is no sure thing, and the upcoming Senate fight will be nothing if not engaging; we wish her the best. 

Wally Adeyemo (Deputy Treasury Secretary). Biden has announced his intention to nominate Obama Foundation president and economist Adewale “Wally” Adeyemo to be deputy secretary of the Treasury Department. Under President Obama, Adeyemo served as deputy director of the National Economic Council, assistant secretary for International Markets and Development at Treasury (as well as deputy chief of staff of the Treasury), and chief of staff of the newly formed Consumer Financial Protection Bureau under the leadership of Elizabeth Warren. When Adeyemo left the White House in 2016, he signed on as a senior adviser at the investment firm BlackRock, as well as at the Center for Strategic and International Studies. Adeyemo, a 39-year old Nigerian-born attorney with impeccable academic credentials to match his wealth of expertise, will likely sail through the Senate confirmation and become the first African American Deputy Secretary of the Treasury. 

Cecilia Rouse (Chair, Council of Economic Advisors). The Council of Economic Advisors (CEA) is a three-person team tasked with providing data and advice to the president on domestic and international economic matters. The agency produces the annual Economic Report of the President, which assesses the state of the economy and outlines economic goals for the coming year. Cecilia Rouse would be the fourth woman and first Black woman to serve as Chair of the CEA. Currently dean of the Princeton School of Public and International Affairs, Rouse is well-known for her work on labor economics, education, and workplace discrimination. In a renowned paper with Claudia Goldin, Rouse showed that employers were more likely to hire women applicants when the applicants were judged "blind", i.e., without knowledge of the applicants’ genders. During the Clinton presidency, Rouse served on the National Economic Council. Later, as a member of President Obama’s CEA, she advocated for increased fiscal stimulus in the wake of the 2008 recession. While her past confirmation to the CEA occurred in 2009 when Democrats controlled the Senate, Rouse’s previous experience in presidential administrations should smooth her path to confirmation, although conservative Republican Senators are sure to oppose her nomination. 

Jared Bernstein (Member, CEA). Biden has also nominated the other members of his CEA. Jared Bernstein, currently a senior fellow at the Center on Budget and Policy Priorities, a left-leaning fiscal policy think tank, has been a prominent economic advisor for Biden for years. Bernstein was chief economist to Vice President Biden from 2009-2016 and played a major role in crafting the $800 billion economic rescue package in 2009. During the campaign, he continued to serve as one of Biden’s top economic advisors. A longtime defender of the working and middle class and advisor to 20/20 Vision, Bernstein is also a known critic of free trade agreements, and he will refocus U.S. trade policy to benefit workers and balance trade relations. Further, throughout the pandemic, Bernstein has advocated for increased deficit spending, particularly on enhanced unemployment benefits. Bernstein’s nomination is a concrete indication of Biden’s commitment to smart, focused policymaking. 

Heather Boushey (Member, CEA). Long-time advisor to President-elect Biden, Heather Boushey will serve as another member of Biden’s CEA. Boushey is currently the president and chief executive of the Washington Center for Equitable Growth, a nonprofit she co-founded in 2013. Boushey is best known for her 2019 book, Unbound, in which she identifies the ways that economic inequality undermines economic growth. During the COVID-19 crisis, Boushey has advocated for automatic stabilizers — both for unemployment benefits and state and local aid. Prior to heading the Washington Center, Boushey served as an economist for the Center for American Progress, the Joint Economic Committee, the Center for Economic and Policy Research, and the Economic Policy Institute. Boushey would have served as Chief Economist for Hillary Clinton’s 2016 transition team. At the CEA, Boushey will continue to push for policies that will facilitate an inclusive post-COVID economic recovery. 

Summary.  In strong contrast to the previous administration, Biden’s economic team is characterized by expertise, diversity, and inclusive economic policies. While Biden was perhaps the most moderate of the Democratic presidential candidates during the primary, his nominees are committed to addressing economic inequality and protecting the most vulnerable Americans. Their confirmations will also be among the first tests of Mitch McConnell’s obstructiveness should Republicans keep control of the Senate. If they are confirmed, come 2021, we can expect Biden’s White House to put forward a large relief and stimulus package, which will be crucial to keeping small businesses, states, and families — that is, the economy — afloat until the virus is under control.

Good Job News - U-6 Down Nearly 2 Percentage Points

The U-6 Unemployment Rate Since 1994. FRED Chart by FR Bank of St.
Louis. The rate fell in December to 11.1 percent, not seasonally adjusted.

The year 2014 is the best for U.S. job growth in 15 years. The BLS announced today growth of 252,000 U.S. jobs in December plus a total of 50,000 jobs added as adjustments to prior two months. Continuing the November pattern, job growth in December was strong in professional and business services, construction, food services and drinking places, health care, and manufacturing.

The unemployment rate in December was the lowest in six years, down to 5.6 percent from 5.8 percent. A rate that falls below 6 percent is ordinarily a warning of inflationary pressures, and like a Greek statue the Federal Reserve remains poised to reduce its efforts to stimulate the economy through low interest rates. However, wages remain depressed, economic problems in Europe are a drag on future growth, and the bond-market rooms of the global financial casino - where the smartest players are rumored to hang out - don't seem to worry about a rise in long-term interest rates.

Alternative measures of unemployment and labor utilization show improvement, especially U-6, which fell 1.9 percentage points between December 2013 and December 2014. (Jason Furman, Chairman of the President's Council of Economic Advisers, this morning, in his comments on the data from The White House, shows a 1.8 percent drop, presumably because the White House is working with more precise data.) This suggests a significant drop in those employed involuntarily part-time, for economic reasons, another sign of a cyclical recovery.

Alternative Measures of Unemployment and Labor Utilization

Measure	Not seasonally adjusted			Seasonally adjusted
	Dec. 2013	Nov. 2014	Dec. 2014	Dec. 2013	Aug. 2014	Sept. 2014	Oct. 2014	Nov. 2014	Dec. 2014
U-1 Persons unemployed 15 weeks or longer,  % of the civilian labor force	3.5	2.7	2.5	3.6	2.9	2.8	2.8	2.7	2.6
U-2 Job losers and persons who completed temporary jobs, % of the civilian labor force	3.5	2.7	2.8	3.5	3.1	2.9	2.8	2.9	2.8
U-3 Total unemployed, % of the civilian labor force (official unemployment rate)	6.5	5.5	5.4	6.7	6.1	5.9	5.7	5.8	5.6
U-4 Total unemployed plus discouraged workers, % of the civilian labor force plus discouraged workers	7.0	5.9	5.8	7.2	6.6	6.3	6.2	6.2	6.0
U-5 Total unemployed, plus discouraged workers, plus all other persons marginally attached to the labor force, % of the civilian labor force plus all persons marginally attached to the labor force	7.9	6.8	6.7	8.1	7.4	7.3	7.1	7.1	6.9
U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, % of the civilian labor force plus all persons marginally attached to the labor force	13.0	11.0	11.1	13.1	12.0	11.7	11.5	11.4	11.2
NOTE: Persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule. Updated population controls are introduced annually with the release of January data. Source: BLS.

A Projection Is Not a Promise

Incoming presidential administrations tend
to be overoptimistic and don't make enough
 use of their predecessors' experience.

In a post on this blog on November 27, 2008 I commented on the Obama transition based on consulting a 1986 book by Carl Brauer on presidential transitions from Eisenhower to Reagan.

Brauer argues that incoming administrations are inherently overoptimistic, which may explain why — another conclusion — they also tend to underutilize the experience of outgoing administrations.

Overoptimism on the economy was certainly in evidence on January 9, 2009, as the projections by the Council of Economic Advisers on that date were for the unemployment rate — assuming stimulus actions were in place — to peak at 8 percent during 2009.

That peak was topped before mid-2009. The GOP argued that the 8 percent unemployment rate was a broken "promise". PolitiFact rates that charge as "Mostly False".  Here is the PolitiFact Truth-o-Meter summary of three years ago, July 9, 2009, six months after the CEA forecast:

They [GOP critics] are referring to a Jan. 9, 2009, report called "The Job Impact of the American Recovery and Reinvestment Plan" from Christina Romer, chairwoman of the president's Council of Economic Advisers, and Jared Bernstein, the vice president's top economic adviser.

Their report projected that the stimulus plan proposed by Obama would create between three and four million jobs by the end of 2010. The report also includes a graphic predicting unemployment rates with and without the stimulus. Without the stimulus (the baseline), unemployment was projected to hit about 8.5 percent in 2009 and then continue rising to a peak of about 9 percent in 2010.

With the stimulus, they predicted the unemployment rate would peak at just under 8 percent in 2009.

But in June, the unemployment rate was 9.5 percent.

In the past week, the administration has acknowledged its projections were wrong.

Here's what Romer herself said in a July 2 interview on Fox: "None of us had a crystal ball back in December and January. I think almost every private forecaster realized that there were other things going on in the economy. It was worse than we anticipated. What the private forecasters are saying now is that they do anticipate that the economy will start growing again in the second half of the year, and that usually, then, employment and unemployment start to respond shortly after that. So I think that is a realistic expectation."

CityEconomist Comment: With the benefit of hindsight, the projection might be called overoptimistic. The problem for the CEA was that the fourth-quarter economic data were not yet available in January and no one knew yet how capital-weak the banks really were, how unsupervised the banks were, and how worldwide the recession would be. But in no way was the projection a promise — something to stress given that in January the old claim was revived by the GOP.

The experience shows us the wisdom of our forebears. Brauer's advice to new presidential administrations to be cautious is good. Upon arrival, a new administration's projections should lean to the pessimistic side. Similarly, there is a principle among forecasters that if you give a number, don't give a [firm] date. If you give a date, don't give a [firm] number. Especially for the very first forecast.