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Diminished CEA Inhibits Reasoned Tax Analysis, Former Staff Say

Posted on February 22, 2017 by Jonathan Curry

The vacancy at the top of the Council of Economic Advisers (CEA), along with a limited support staff, raises questions about whether a long-standing nonpartisan voice for economic analysis in the White House is being crowded out, according to former council staff.

These issues -- the Trump administration has yet to nominate anyone to serve on the three-member council, and the CEA chair was excluded from the president's Cabinet -- persist even as media reports indicate that Trump transition officials instructed CEA staff to issue a forecast that complements the administration's ambitious growth plan. 

The CEA has a reputation for nonpartisan analysis, evidenced in part by the fact that senior economists traditionally stay on even as administrations change from one party to the next, according to Mark Mazur, director of the Urban-Brookings Tax Policy Center, and a former analyst for the CEA.

Kenneth Gillingham, who stepped down as a senior economist for the CEA in July 2016, told Tax Analysts that without a CEA chair, neither the "front desk" staff -- consisting of the chief of staff and special research assistants to the members -- nor the departing senior economists would have been replaced. "It's currently a CEA with much less capacity for analysis," he said.

Gillingham, who served at the CEA under both the George W. Bush and Obama administrations, said the CEA's role has "definitely been diminished relative to previous administrations," noting that the CEA chair was a member of both cabinets and the council's office was kept fully staffed.

The CEA's role in the White House is to give presidents information "they sometimes may not want to hear," according to Chad Stone of the Center on Budget and Policy Priorities, and former chief economist for the CEA during the Clinton administration. "With no members around, there's no one to do that."

Trump's campaign set ambitious goals for economic growth, aided by the economic analysis of his advisers Peter Navarro and Wilbur Ross. Navarro now serves as the director of Trump's newly formed trade advisory panel, while Ross was nominated to serve as commerce secretary. Treasury Secretary Steven Mnuchin has also echoed Trump's predictions of growth, suggesting during his confirmation hearing that the U.S. could achieve 3 to 4 percent GDP growth through tax and regulatory reform.

With an empty lineup at the CEA or even a council with diminished importance relative to other voices in Trump's Cabinet, "you're really missing an important part of putting a check on some of the more extreme economic views that come from interests within the departments or from politicos in the White House," Stone said.

Whose Baseline?

Along with the Treasury secretary and the director of the Office of Management and Budget, the CEA chair serves as part of a "troika" that coordinates to put out an economic forecast on behalf of the administration.

Differences in the forecasts put forth by the agencies in the troika are resolved at a higher level by the three agency heads. If there are no real disagreements, not having a CEA chair isn't a significant problem, as the CEA staff is still able to do analytical work. But if there are differences, it's unclear who advocates for the CEA's approach, Mazur said.

Stone said the remaining staff at the CEA is primarily academics serving on a temporary basis who are responsible for offering academic advice and not necessarily politically savvy decisions, Stone said. "Right now there's nobody, and that affects the economic forecasts," he said, referencing a February 17 report by The Wall Street Journal.

According to the Journal, Trump transition team officials told staff at the CEA how much growth they expected their budget plan to achieve, and then instructed the CEA to fill in estimates to make those numbers work. This reverses the traditional approach in which the administration is presented with a baseline forecast determined first by the CEA, and then White House officials base their policy proposals on how those proposals would affect that forecast.

"I find this development to be worrisome," Gillingham said concerning the Journal report. "One of the key advantages of involving CEA staff in the process is that it keeps the budget forecast as nonpartisan as possible," he said.

Tax Reform

As the White House prepares to release its own tax reform plan in the next few weeks, some former CEA staff argued over how much a diminished CEA would hurt that effort.

"The primary reason why having a smaller and less influential CEA would hinder the evaluation of tax proposals is that there would no longer be the voice at the table that 'just runs the numbers' to give an objective assessment of the situation," Gillingham said in an email. "CEA's long-standing role through both Republican and Democratic administrations is to shoot down 'bad' ideas using economic analysis and evidence. This is a crucial check in the policy process that helps lead to more sensible policy approaches," he continued.

Stone also said that without a fully functioning CEA, as the White House prepares its tax reform proposals, it may be inclined to rely more on the economic views of Navarro and Ross or the Tax Foundation's dynamic scoring model, than nonpartisan government scorekeepers. "CEA should be a voice of reason on that front," he said.

But while Mazur, who until recently served as Treasury assistant secretary for tax policy, agreed that the Trump administration would undoubtedly benefit from a fully staffed CEA, he said that doesn't necessarily preclude the White House from putting out a thoughtfully analyzed tax reform plan.

The CEA and the National Economic Council may have one or two senior staff devoted to tax analysis, but the Treasury Office of Tax Analysis has closer to 50, he said. White House economic staff members typically are not the ones "doing the bulk of the heavy lifting on [tax] analysis" because they wouldn't have the same amount of staff even under ideal conditions. The White House's tax plan would benefit from CEA analysis, but it's not a complete game-changer without it -- they'd just have to rely on Treasury staff instead, said Mazur.