The Chapter that Wasn't

Via Brad DeLong, we find Jonathan Weisman's article in the Washington Post about a chapter that wasn't:

At the National Security Council's request, the White House excised a full chapter on Iraq's economy from last week's Economic Report of the President, reasoning in part that the "feel good" tone of the writing would ring hollow against the backdrop of continuing violence, according to White House officials.

The decision to delete an entire chapter from the Council of Economic Advisers' annual report was highly unusual. Council members -- recruited from the top ranks of economic academia -- have long prided themselves on independence and intellectual integrity, and the Economic Report of the President is the council's primary showcase.

The withholding of a completed chapter struck some economists from both political parties as evidence of the council's waning influence.

I only worked one year at CEA, and so I don't know how things used to be. The relevant comparison on "waning influence" would be just the 10 years since the National Economic Council was instituted. One would also want to make some allowance for the impact that 9/11 had on the relative importance of different groups within the Executive Office of the President--some reduction in prominence should be expected. Someone from the Clinton CEA years would have to tell me how influential they were in things like NAFTA, welfare reform, and the failed healthcare overhaul for me to get a better understanding of trends over time.

The CEA appears to have been very influential during the first two years of the Administration. That seems to be due to the combination of Glenn Hubbard serving as Chairman and the Administration being focused on tax cuts. Glenn was involved with the 2000 campaign and has been focused on tax reform for his entire career in government. I could be persuaded that the CEA was less influential after Glenn left. Greg Mankiw was a newcomer to the senior staff and he arrived just as the 2003 tax law was enacted. Even the Medicare bill was in conference by the end of June 2003. Changes in the leadership at the NEC (Steve Friedman replacing Larry Lindsey) and Treasury (John Snow replacing Paul O'Neill) also led to a more unified and collegial working relationship among 3 of the key economic entities. "Influence" would be harder to measure in that environment. Renovations at the EEOB also got CEA staff moved out of the White House complex in the spring of 2003, and that probably reduced the informal interactions between CEA staff and other policy staffs in the EOP.

This isn't a complaint or criticism about anyone at CEA or in the rest of the EOP--it's just an assessment of how things might be different now. I learned a lot from Greg Mankiw and others at CEA and consider my time there to be one of the highlights of my professional career. But even if the CEA's influence has receded a bit over the past couple of years, it doesn't strike me as some insidious development, nor is it necessarily a trend. This episode regarding the chapter on Iraq doesn't really change my view all that much. As we learned last year (if we didn't know it before), the ERP can get quite a bit of media attention, because it is perceived as reflecting the President's policies. In 2004, we got hit with negative press over the economic forecast, outsourcing, the Social Security chapter, and some other issues. Much (though not all) of this negative press was overblown. A chapter on Iraq might have been the chapter to get all of that attention this year. It's not surprising that NSC would look to head that off.

The ERP goes through the White House staffing process. This means that all Executive Branch offices, departments, and agencies have the opportunity to request changes, and the CEA must respond to each request or explain why the request is not being accommodated. The ERP is one of a very few documents that CEA puts through the staffing process. In most cases, it is CEA insisting on major changes to materials submitted by other offices. Briefing materials for the President, comments on legislation moving through Congress, speeches made by the President, and Congressional testimony by senior officials are the most important such documents. Over a chapter on the Iraqi banking system and reconstruction, I'm not sure that I would compromise CEA's authority to insist on changes to all of those other documents over the course of a year. Sometimes, you have to pick your battles, and I don't think this is a new development.

One of the biggest surprises I found in working at CEA was just how involved NSC is in international economic policy within the Executive Office of the President. I would have thought this to be more the province of CEA, Treasury, and the US Trade Representative. That said, I have very positive things to say about the economic analysts working at NSC while I was at CEA--they were extremely knowledgeable about a lot of topics and generally on the right side of issues at meetings that I also attended. (I wasn't around when the steel tariffs were put in place, and I don't know the details of which agencies lined up on which side.)

Would I be happier if the Iraq chapter were in the 2005 ERP? Sure. Do I believe the following quote in Weisman's article?

White House spokeswoman Dana Perino dismissed the excision as insignificant, saying the chapter may still be published in some form in the future. The piece dealt with the development of the Iraqi banking system, financial markets and other economic institutions after the end of Saddam Hussein's rule. It painted a positive portrait of Iraq's emergence as a potential free-market bulwark in the Arab world.

Perino said the chapter did not belong in the Economic Report of the President. "A decision was made not to include a chapter on Iraq's economy in the report, as the Economic Report of the President is an analysis of the American economy," she said.

No, it's obviously not accurate, as the article goes on to demonstrate. But is the loss of the chapter a big event in the history of CEA? No, I don't think so.

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