Published at on September 22, 2010

By Tony Fratto

I’ve timed it: it takes about four minutes for the average Treasury secretary to walk from his southwest corner office in the Treasury Building to the Oval Office on the southeast corner of the West Wing.

With the Treasury secretary so close to the President — indeed, actually part of the White House campus — it leads one to wonder why the position of White House Director of the National Economic Council is even needed.

Answering that question will give some insight as to who President Obama should choose to replace the exiting Dr. Larry Summers, the current NEC Director.

President Obama opened the door to speculation during his CNBC-hosted town hall meeting on Monday when he said in response to John Harwood’s question that he hadn’t made any decisions about his post-midterm economic team. Speculation about who would depart was answered yesterday when the White House confirmed that Dr. Summers would return to Harvard, and Treasury Secretary Tim Geithner would remain in his post.

And so we’re now free to proceed with Washington’s favorite parlor game: speculating who will (or should) get the job.

Pro-business voices — and even some Administration mattress mice — are calling for an NEC director with real private sector business experience: a CEO, preferably a woman to balance the Administration’s all-male economic cabal.

I’m not interested in whether the President achieves chromosomal balance among his advisors, but putting a CEO in the job will most likely be a disaster, however much this Administration needs to mend fences with the business community and gain a better understanding of its concerns.

It’s necessary to actually understand what a director of the NEC does. I’ve heard the job described as the “chief economic advisor to the President” and as the “White House economic spokesman”. While those roles are important, they are, respectively, second and third on the list of responsibilities of the NEC director. The primary, and most critical job is as the coordinator of policy — leading the Administration’s policy-making process.

(For an excellent and thorough review of economic policy making in the White House, see former Bush White House NEC Director Keith Hennessey’s post here)

I’m trying to think of a CEO I know who has great passion for coordination and process…. Nope…I’m drawing a blank. Most CEOs I know are constitutionally incapable of serving in this role.

CEOs are used to leading and being followed. The NEC director’s job isn’t to lead. Instead, it’s to be the “honest broker” on behalf of the President — to ensure that all members of the Administration’s economic policy-making team have a seat at the table, have the opportunity to debate and shape policy, that their concerns are voiced and respectfully considered. The job isn’t to make policy, but to consider, winnow, and develop policy options for the President.

CEOs also tend to have a relatively narrow level of experience on the economic policy issues — they usually have achieved success only in a single sector, if not at a single firm. But the breadth of issues confronting any White House on any given day is vast. Here’s a limited list of the economic issues I expect the NEC has on its plate today:

  • Assessing the current economic outlook
  • Tax Policy
  • Housing
  • Impact of stimulus programs
  • China trade and currency issues
  • Consideration of Fed monetary policy
  • Planning new economic policies for 2011 and the President’s budget
  • International development programs
  • Preparation for the G20 Summit in Korea and international financial regulations

That’s is a short list, certainly excluding a number of issues I’m not aware of. But with every one of them there exists an agency head with specific expertise, a team of staff, economists, and policy experts back at the agency, and conferred with primary responsibility for making policy. A CEO running roughshod over their legitimate process needs would lead to dissention.

Treasury Secretary Geithner, given the President’s obvious degree of confidence in him, will now clearly be viewed the President’s chief economic advisor, his chief economic policymaker, and his top spokesman on the economy. Having worked with three Treasury secretaries, maybe I’m biased, but I believe this is his appropriate role — especially keeping him on equal footing with his counterparts at finance ministries in other nations. Putting a high-profile CEO essentially in competition with Geithner would unnecessarily lead to confusion (as it did, at times, with Dr. Summers).

Maybe there’s a CEO out there who can conform to the needs of the NEC job, but it’s unlikely. The President would be wise to select a director with staff and policy-making experience and with more general knowledge of the government’s breadth of economic policy issues. Names such as Dr. Laura Tyson — a veteran of the post in the Clinton White House, and Gene Sperling –another top Clinton White House economist, each bring the necessary scope , experience, and temperament for the job, but there are others.

At any rate, male or female, Caucasian or minority, a CEO in the NEC job will hardly mend fences with the business community. Too much damage has already been done because of reckless, populist rhetoric, and more importantly, from actual policies now in place that the Obama Administration has no interest in reversing. Indeed, actual policies going forward will continue to generate friction with the business community.

Tony Fratto is a Managing Partner at Hamilton Place Strategies, former Assistant Secretary at the U.S. Treasury Department, and a former White House official. He is also an on-air contributor for CNBC.