U.S. President Jimmy Carter drove his economic advisors so crazy that they felt forced to set up a secret policy committee.
That’s just one of the bizarre stories from a new book that details the experiences of White House economics gurus over the past 50 years.
The book, When the President Calls: Conversations With Economic Policymakers, by NYU professor Simon Bowmaker, sheds new light on the inner workings of how things get done in the executive branch. It involved extensive interviews with dozens of past economic bigwigs, including Alan Greenspan, Paul Volcker, Austan Goolsbee, Janet Yellen, Robert Rubin, and Hank Paulson.
What Bowmaker’s work reveals is as bizarre as anything you’d expect from Capitol Hill, even now.
Take the administration of president Jimmy Carter, under which the U.S. suffered double-digit inflation and stubbornly high unemployment.
That economic malaise got exacerbated by Carter’s lack of understanding of the economy, his decision-making inability, and a self-made byzantine bureaucracy, his former advisors say. While Carter could recite facts and figures, it didn’t translate into working knowledge that would make for good policies.
FILE – In this Oct. 23, 2016, file photo, former President Jimmy Carter sits on the Atlanta Falcons … [+] bench before the first half of an NFL football game between the Atlanta Falcons and the San Diego Chargers, in Atlanta. Carter has been treated for dehydration while volunteering with Habitat for Humanity in Winnipeg. (AP Photo/John Bazemore, File)
“The president had no real sense of how the economy works, particularly the interrelationships within it,” said Michael Blumenthal, Secretary of the U.S. Treasury from 1977 to 1979.
Carter wanted to help deal with the tanking value of the dollar in the 1970s, but he couldn’t understand that by raising the minimum wage, he’d spark another run on the greenback, says Blumenthal.
“That’s the sort of dilemma that Carter was never able to get his mind around,” Blumenthal says. In other words, Carter couldn’t deal with the inevitable trade-offs required.
Carter’s lack of economics savvy also got exacerbated by a decision-making bureaucracy gone mad, says Charles Schultze, chairman of the Council fo Economic Advisors from 1977 and 1981.
Carter made too many promises to include people on his economic policy committee. The result was that more than two dozen people showed up at the second meeting. Even Carter was shocked at what he had created.
“The president walked in and was absolutely flabbergasted,” Schultze says.
“We told him that he had to do something about it, so we established an executive committee,” he says. “Unfortunately, that became too big as well.”
So finally, Schultze and his exasperated colleagues took some dramatic action. They set up a clandestine organization within the executive branch.
“Finally, three or four of us decided to set up a secret committee, called the X Committee, which did the work on economic policy,” Schultze revealed.
It isn’t clear whether the participants told the president what they were doing.
Carter’s wasn’t the only administration where things got strange.
How Obama’s Team Almost Let Chrysler Die
During the financial crisis of 2008-2009, at least two of President Barrack Obama’s advisors recommended letting automaker Chrysler fail while at the same time saving General Motors.
That period also coincided with the disastrous mess on Wall Street and a massive bailout of multiple banks.
MIAMI, FLORIDA – NOVEMBER 02: Former U.S. President Barack Obama speaks during a rally to support … [+] Florida Democratic gubernatorial candidate Andrew Gillum and U.S. Senator Bill Nelson (D-FL) at the Ice Palace film studios on November 02, 2018 in Miami, Florida. Senator Nelson (D-FL) and candidate Andrew Gillum are in tight races against their Republican opponents. Credit: MPI10 / MediaPunch /IPX
The question eventually came down to whether both could be saved or just one and two advisors wanted to leave Chrysler twisting in the wind.
“I was most vocal that doing both was risky,” said Austan Goolsbee, who was on the Council of Economic Advisors from 2008 to 2011.
The problem, as he saw it, was whether the government had enough cash to rescue both ailing companies. If the cash got doled out on a piecemeal basis, the companies might both fail along with lots of their suppliers.
Whereas, if the bailout were more focused, then one company would have a better chance of making it.
Goolsbee wasn’t the only one with reservations.
“Austan Goolsbee and I were on the side that recommended bailing out GM but not Chrysler,” said Alan Krueger, who advised Obama in various roles from 2009 and 2013.
Luckily for Chrysler, Obama overruled their advice and saved both companies.
Perhaps surprisingly, that’s something that both Krueger and Goolsbee now say was the right decision. “
“In retrospect, I think he [Obama] made the right decision. Austan and I were both wrong, and we have written a paper about it,” Krueger says.
Bowmaker’s book is also stacked full of other juicy stories and tidbits of life inside the White House. That include various advisors hurling abuse at each other.
If you want the inside skinny on what happens at White House economics meetings, then this is the book for you.