The brewing fight over the next chair of the Federal Reserve shows the right way to go about influencing a President.
The head of the Federal Reserve, or more formally Chairman of the Board of Governors of the Federal Reserve System (although that could become Chairperson soon, more on that in a bit), is one of those positions that doesn’t seem to matter until you take some time to read about it, and then you realize that holding that office makes you perhaps one of the most powerful people in the world. The job makes you the head of the Federal Reserve, the central bank of the United States, and give you tremendous influence in deciding policies that have a huge impact on the American, and thus global, economy. For example, the Fed can use all sorts of policy tools to decide the interest rate that ordinary folks pay for credit. The low interest rates set by Alan Greenspan in the early aughts were responsible in no small part in making credit cheap to ordinary Americans which in turn caused the huge boom in housing and expansion of household debt that preceded our current economic woes. In addition, the Fed can also do things like use its massive balance sheets to buy assets to try as goose the economy, something that current chair Ben Bernanke has been doing to a great degree.
The Fed’s role in economics is complicated to say the least, (if you’re new to this field I’ve found Matt Yglesias’ introductory take to be helpful, if you have your own favorite pieces feel free to link to them in the comments) but basically everyone agrees that the job is very important. This makes President Obama’s choice for whom to nominate a crucial decision in his second term. Not only to impact people with an improving economy but also to influence the 2014 midterm elections , as in a bad economy an incumbent president’s party tends to lose, not to mention the 2016 presidential race, for the very same reason.
The top to contenders to for the job are former Treasury Secretary and head of the White House’s National Economic Council Larry Summers and Janet Yellen the current vice chair of the Fed. Summers is generally regarded as very smart and experienced economist but he is also seen as is somewhat of a lightning rod for his liberal critics because of his shoot-from-the-hip verbal style and past opposition to a lot of regulations on the financial industry. Meanwhile Yellen is also considered to be an experienced and excellent economist and would potentially be the first female head of the Federal Reserve.
Until recently, most liberals assumed that Yellen would be the pick. This all changed a few days ago when Ezra Klein reported that Summers was now the front runner. Almost instantly people started coming out of the woodwork in the liberal blogosphere to go after Summers and support Yellen. As Slate’s Matt Yglesias summed up the reaction, “David Dayen makes the financial reformers’ case against Summers. Amanda Marcotte makes the feminist case against him. Noam Scheiber says he has “dangerous blind spots” while Felix Salmon says a Summers pick would be ‘enormously disappointing on many levels.’”
This type of public outcry is one of the more effective ways for liberals to influence Obama’s policies. In order to govern effectively, Presidents have to balance their own political agendas with the desires of the groups that make up their political coalition. But finding what groups of people collectively want can be a tricky matter. Presidents have a lot of ways to try and figure this out, they can talk to prominent organizations, or other elected officials or have their staff pour over polling data. They can also look at important opinion makers in a group and see what they have to say. In this case Obama is getting a lot of signals that liberals would prefer Yellen over Summers which is important information for Obama about how to keep people in his liberal base happy.
Does this guarantee that Obama will nominate Yellen over Summers? Of course not, he might decide that other factors, like his personal relationship with Summers, is more important. But he, and his staff, certainly now have an idea about what liberals think on the matter and what their reaction will be to a Summers nomination.
Unfortunately for liberals, they haven’t been very good at doing this during a lot of the Obama administration. Rather than clearly signaling what they want to Obama, an all too common M.O. is to wait until Obama makes a decision and then cry foul that it wasn’t the right liberal thing to do. Unfortunately this trend makes the task of changing the decision all that more difficult, as in order to please his liberal base Obama would have to publicly reverse himself. It happened when Bill Daley was made chief of staff and when Gene Sperling was appointed to head the National Economic Council. In fact, this trend predates the Obama Presidency itself, with the decision by many liberals to scorn Obama’s choice of popular pastor Rick Warren to speak at Obama’s inauguration. Perhaps if liberals had announced their opposition to Warren, or people with his views on social issues, appearing with the President beforehand Obama could have chosen someone else. Instead he got the the unfortunate choice of kicking a popular figure off of the inaugural program or upsetting a lot of liberals.
Simply put, presidents are hard to influence, especially when they no longer have to worry about being re-elected. In fact the best time to influence them is when they are running for the nomination. But this doesn’t mean their decisions are made in a vacuum. Liberals can influence Obama over the next three years but not if they make their preferences unknown. Or wait until a decision is made public before announcing their disapproval.
Photo by Carolyn Kaster AP