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April 04, 2005

Ben Bernanke to Chair CEA

It's not often that I write that a White House personnel decision has increased my trust and confidence in the Bush administration. But that is the case today:

FT.com / World / US - White House chooses Bernanke for CEA: The White House has nominated Ben Bernanke to serve as chairman of the Council of Economic Advisers.... ‘I am honoured by the president's intent to nominate me and subject to Senate confirmation I look forward to this new opportunity,’ Mr Bernanke said....

During his two years at the Fed, Mr Bernanke has proved himself to be an effective communicator. He has been an advocate of transparency in policymaking at the Fed. A keen supporter of inflation targeting, Mr Bernanke's influence lay behind the decision this year for the Fed to start providing two-year inflation forecasts, to help guide market expectations on the central bank's objectives.

Mr Bernanke is seen as a leading contender for the job of Fed chairman, along with Glenn Hubbard, a former CEA chair in Mr Bush's first term, and Martin Feldstein, a Republican economist who held the position during the Reagan administration....

Mr Bush has now put in place the team that will have to make the economic case for the president's chief domestic priority: Social Security reform. The White House is expecting to wage a long campaign to win the introduction of private savings accounts and, while the president has so far failed to win public support, his aides warn against writing off the reform effort so early in the second term.

IMHO, the first thing that Ben should do is to make a stand on a technical-but-vital issue where the CEA should have made its stand: get the Bush administration to reduce the clawback real interest rate on its proposed private accounts from 3% plus inflation to a floating rate equal to the U.S. Treasury's borrowing rate (or the borrowing rate minus a small margin). That would keep Bush's private accounts from being a bad deal for the non-rich who opt for them...

Posted by DeLong at April 4, 2005 06:50 PM