Brad Setser

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Hubbard is in pole position: the Sunday New York Time buried the lede

by Brad Setser
January 24, 2005

Apparently the Federal Reserve is beginning to worry that the Administration is not all that serious about reducing the fiscal deficit …

Wonder why. It seems like Martin Feldstein’s concerns about Reagan’s fiscal deficits are not exactly helping his chances of taking over the Fed. Not sufficiently loyal. If the best the White House can say about Dr. Feldstein is that he is “not out of the running,” it seems to me like he is out of the running. And the White House now says that John Taylor is not even under consideration. That is sort of rude: Taylor is the Bush Administration’s top economist at the Treasury, and he has served Bush loyally.

No Taylor, and it sounds like no Feldstein. That leaves the field open for L. Glenn Hubbard — not exactly a deficit hawk. The White House can trust Hubbard not to worry too much about big deficits that stem from the zealous pursuit neo-Republican supply-side dreams, like dismantling Social Security and exempting all investment income from taxation.

Ben Bernanke still seems to be on the short-list to replace Greenspan; The White House did not rule him out. But then again, the White House needs to convince Bernanke to accept the top job at the White House’s Council of Economic Advisors (CEA), and dangling the prospect that a successful stint might enhance his chances is one way to make the CEA job more attractive. But it hardly sounds like he is in the lead either.

Rice to State, Hubbard to the Fed. It certainly would fit the pattern of rewarding W loyalists with plum jobs …

Old-fashioned grown-up deficits-do-matter Republicans never seem to get the ear of this White House, or become true members of Bush’s inner circle. Appointing Hubbard would be one way for the White House to signal that it thinks the Fed is too worried about deficits. I — and many others — will be interested to see what the latest CBO budget forecasts show when they are released tomorrow.


  • Posted by anne

    “Loyalist” is precisely what Glenn Hubbard is, and the job at the Fed will go to a loyalist whether Hubbard or another. Republicans are not foolish enough to appoint those who are not loyalists to policy making posts when they are finally President and Congressional majority.

  • Posted by pgl

    If Glenn is appointed to the FED, he’ll not have to face tough questions from his students who have compared what he wrote before joining the CEA v. what he has said since joining the CEA. I guess the theory is that fiscal stimulus lowers national savings EXCEPT those implented by George W. Bush.

  • Posted by brad

    pgl — isn’t one of the big advantages of being dean of columbia business school that you don’t actually have to teach? but the fed staff certainly can ask some difficult questions. An interesting question is whether a hubbard fed would be run by committee, or whether it would remain in essence a one man show …