It’s hard to complain about Obama’s decision to name Paul Volcker as yet another top adviser, as he did this morning in Chicago. But here it goes. Obama already faces two enormous challenges regarding the economy: The crisis itself and the fluid contours of the government’s regulatory structure. Who would have expected the Fed to have such an expansive policy role--or the FDIC, for that matter? What is the right way to structure regulatory bodies like the SEC and the CFTC, which all sides agree need significant reform? And above all, what is the relationship between government and the economy going to look like in the long term?
These are not questions Obama can answer immediately, nor should he try. If anything, this fall’s crisis has taught us that no one understands the economy or its wild gyrations, let alone understands how to respond. His best strategy is to get good people behind him and work pragmatically.
That said, by adding yet another advisory body to the mix--Volcker will head the new Economic Recovery Advisory Board--Obama risks adding yet another challenge to his plate. Of course, it may be that Summers, Geithner, Volcker, Bernanke, Romer, Orszag, Bair, Congress, and an SEC chair yet to be named, along with a long retinue of marquee names down-ticket, will work in harmony as an economic Crosby, Stills, Nash and Young. Just as likely, though, is that proliferating advisory positions and oversized egos will create a financial Plastic Ono Band. This is particularly risky given the evolving power structures within the federal government, which gives sharp-elbowed types like Summers the opportunity to expand their fiefdoms. Obama seems to believe that the wide-ranging advisory structure he managed during the election should be replicated inside the administration. But governing is a lot different than campaigning.