The Council of Economic Advisers has fallen on hard times. Its public standing was recently highlighted by the response to the announced resignation of its latest chairman, Beryl W. Sprinkel. Who, many wondered, is Beryl Sprinkel?
In recent years, the council and its chairman have ceased to play a major role, public or private, in the development of economic policy. Certainly, this is a long fall from the 1960s, when the council joined with the Treasury Department and the Office of Management and Budget to form a troika that dominated the flow of economic advice to the President and Congress.
The current obscurity and irrelevance may prove temporary. The council's role always rises and falls with the importance that the President attaches to it. It has no program responsibilities and exists simply to offer economic advice to a president.
As the late Walter Heller, its most influential chairman, once said, the CEA is a consulting firm with one client. Since President Reagan is an uninterested client, the council is left with no function.
In fact, it was reported that the President was prepared at the beginning of his second term to recommend elimination of the council. Apparently, he was dissuaded from such actions because the option of having a council should not be foreclosed to a future president and the council was at times useful to lend an air of economic verisimilitude to an otherwise bald and unconvincing policy.
In many respects, the current low status of the council reflects a long-term trend. In the 1960s, the council was one of the few centers in government that sought to apply economic analysis to issues of public policy. The other agencies were often overwhelmed in the debate over policy options by their lack of economic knowledge and by the jargon for which economists are so infamous.
These other agencies, however, were fast learners, and by the mid-1970s nearly all of them had hired their own economists even as the terminology of economics had become part of the general collection of buzzwords in Washington.
In most respects, the spread of economic analysis throughout the various levels of government has been beneficial. While the economic perspective does not, and should not, control the outcome of public policy decisions--an inherently political process--the economic consequences of alternative policy actions are considered in greater detail and are better understood than in the past.
The agencies, however, also found that economists could be useful in promoting the interest of the constituencies they represent. The agencies have learned that economists function well as hired guns, who could usually fight the council to an inconclusive draw.
I remember meetings in the government that came to an end when a major participant rose to announce that the subject under discussion was not an economic issue--"the economists cannot even agree among themselves"--and that the decision could be based on a straightforward consideration of the political gains and losses.
Today, there is a greater perception that economic analysis does not lead inexorably to the "right" answers. It is instead a means of formulating the arguments on both sides of an issue. It may have raised the level of debate, but it certainly has not eliminated it.
This dispersal of economic analysis has its counterpart on the congressional side, where the sister organization of the CEA, the Joint Economic Committee, has also faded into oblivion. Now, Congress also has many different organizations that provide it with economic analysis and the arguments on different sides of issues--the Congressional Budget Office, the Congressional Research Service, the General Accounting Office and the staffs of various House and Senate committees. All of these organizations have either been created or have greatly expanded their staffs of economists in the last 20 years.
The decline of the Council of Economic Advisers also reflects the conditions of a profession that has splintered into different camps on the issues that dominate the current macroeconomic policy discussion. Nowadays, economists come affixed with a label, such as supply-sider, Keynesian, monetarist, classicist. And there is a large category of issues for which knowing the label is enough to know the conclusion.
Consensus of Opinion Impossible
Presidents are told that economic issues are complex and that they should hire advisers to aid them in their decisions. Most do. In fact, they hire four or five. But each president is then faced, on any given issue, with a cacophony of four or five opposing points of view, with no obvious basis on which to determine who is right. No Council of Economic Advisers can claim today to represent a "consensus" of the economics profession.