As president, would the GOP frontrunner follow his all-star economic advisers--or the promises he has made to the Republican base? 

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Mitt Romney pitches himself as the sort of guy who surrounds himself with the smartest people he can find. He's the consummate corporate executive: He listens to smart people and puts their best ideas into play. Sure enough, in his presidential campaign, Romney has assembled a team of conservative economists whose smarts and star power, academically and politically, outshine that of any of his Republican rivals. Last year, Romney's economic advisers advocated policies that, if a candidate were to package them together, would amount to the most creative jobs plan in the GOP field.

Which brings us to how Romney's opponents like to portray him--like he's as malleable as Play-Doh. He's the consummate politician, the sort of guy who ignores his smart people and their best ideas, if that's what it takes to win votes. And guess what? When it comes to the mightiest issue in this year's elections--the economy--that's basically what he's done.

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Romney issued a 59-point economic plan with fanfare last September. The platform contradicts landmark findings on monetary and housing policies published in 2011 by his top two economic advisers: Glenn Hubbard, the dean of Columbia University's business school; and N. Gregory Mankiw, a Harvard University professor and the author of the nation's most widely used college economics textbook. Mankiw and a coauthor called last spring for the Federal Reserve Board to goose consumer demand by easing monetary policy--as the Fed did--in unconventional ways. Last fall, Hubbard and two collaborators argued for reducing the interest rates on 30 million home mortgages to strengthen the housing market, which economists increasingly see as the greatest drag on domestic economic growth.

But in both cases, Romney has vowed to pursue the opposite course. He has said he would replace Federal Reserve Board Chairman Ben Bernanke with someone who would tighten monetary policy, to guard against a supposed threat of inflation that few economists worry much about. And he has said he would let the housing market stabilize on its own instead of intervening. Romney stuffed his elaborate economic plan with tax cuts and a cap on federal spending, mimicking his Republican rivals and appealing to the limited-government conservatives who dominate the party's primary electorate.

This, then, is the Romney Conundrum--for conservatives, liberals, and everyone else. Even on the economy, Romney's signature issue, it's hard to know where his heart lies--and how he would govern in the White House. Would the former Massachusetts governor listen to his best and brightest? Or to his party base?

"Romney's got Glenn and Greg advising him, and they're both top-notch economists," said Keith Hennessey, who ran the National Economic Council for President George W. Bush. "But there's more to economic policy than just economics."


Tension between what presidential candidates say on the campaign trail and what their economic advisers say in their work is nothing new. Romney, if elected, would join a parade of recent presidents who struggled to reconcile campaign promises with political and economic reality. George H.W. Bush violated his "read-my-lips" vow not to raise taxes and lost reelection. Bill Clinton ran on a middle-class tax cut, then quietly dropped the idea as president to focus on deficit reduction. George W. Bush broke his pledge to concentrate his tax cuts on low- and middle-income Americans and to pay down the national debt. Barack Obama still hasn't renegotiated the North American Free Trade Agreement, as he promised during his 2008 campaign.

Some of these promises were broken because, once a candidate entered the White House, his economic advisers disagreed among themselves about what to do or one of them gained clout over the rest. That seems less likely to happen with Romney, who has surrounded himself with an ideologically homogenous team. Hubbard, who ranks as the candidate's top economic adviser, and Mankiw, the only other economist advising Romney in an official capacity, are both mainstream conservatives highly regarded in academia and in Washington; they served successively as chairman of George W. Bush's Council of Economic Advisers. The other two members of Romney's economic team have long experience as politicians--former Sen. Jim Talent of Missouri and former Rep. Vin Weber of Minnesota, neither of whom fits the tea party mold. The economic team has no intellectual counterweight to Mankiw's expansionary views on monetary policy or Hubbard's on housing.

What you get from piecing together the recent work of Romney's advisers is a coherent, data-driven story of what is wrong with the U.S. economy and how it ought to be fixed--a story that candidate Romney skirts. Here's how it reads: After the recession, the data suggest, a shortfall in demand has hampered the U.S. recovery; simply put, consumers and businesses are not spending enough. A pile of economic research shows that the housing slump bears much of the blame, as falling prices have robbed Americans of wealth, prompting them to spend less. The plunge in prices has also choked off a traditional source of credit for small-business owners: the ability to borrow against their homes to start or expand their firms.

The best way to rescue an economy from a demand shortfall, Mankiw and his Harvard colleague Matthew Weinzierl argued in a research paper last year, is by flooding the marketplace with liquidity: Cut interest rates all the way to zero to make borrowing cheap. If that isn't enough to reduce joblessness to what economists consider full employment, the central bank should take extraordinary steps, such as signaling that interest rates will stay low for years to come. "A sufficiently flexible and credible monetary policy is always sufficient to stabilize output following an adverse demand shock," Mankiw and Weinzierl wrote. They see no danger of rising inflation until the economy reaches full employment or any need for Keynesian-style government spending to bolster demand unless politics gets in the way of monetary easing.

But what if potential homebuyers can't take advantage of low interest rates? This is the hindrance to a recovery that Hubbard and two colleagues worried about in a paper last September (updating work from 2008). In it, they explained that the troubles in today's mortgage market, including falling housing prices and tight credit conditions, have slowed the recovery by turning away middle-class Americans whose job prospects have suffered. Hubbard and his coauthors, Columbia economist Christopher Mayer and business consultant Alan Boyce, suggested that Washington allow anyone with a mortgage backed by a government-sponsored entity (such as Fannie Mae or Freddie Mac) to refinance at today's rock-bottom interest rates, potentially saving mortgage-payers some $70 billion.

Taken together, Hubbard's and Mankiw's prescriptions promise to accelerate the economy's growth at low cost. They also defy the tax-cutting, lower-spending, interest-rate-raising orthodoxy that prevails among Republicans--including Romney.


Romney's economic plan does include crucial elements endorsed by Hubbard, who wrote the introduction, as well as by Mankiw and numerous other conservative economists. Among them: reforming the tax code to cut marginal rates and to eliminate loopholes (although Romney has provided few details); paring federal regulations to encourage business investment; and curbing spending on safety-net programs, such as Medicare and Social Security, as a means of reducing government's presence in the economy.

Still, the story that the candidate's economic advisers like to tell about the housing market and monetary policy is one that the candidate's plan sidesteps. It does nothing, for one thing, to address the crisis in foreclosures and falling home prices; on the stump, Romney says he would let the housing market heal itself. His plan is also silent on monetary policy, although in a debate last fall, Romney said he would replace Bernanke as chairman for having "overinflated the amount of currency he has created." Translation: I want to tighten monetary policy, not ease it.

Housing and monetary policy aren't the only issues on which Romney has parted ways with his economic advisers. Mankiw has praised the Simpson-Bowles deficit-reduction plan, which includes net tax increases, and Hubbard has endorsed revenue-raising tax reform, yet Romney and other GOP hopefuls have pledged to balance the federal budget through spending cuts alone. Mankiw has championed taxes--on gasoline, for example--that are meant to reduce pollution or otherwise compensate for market inefficiencies.

Economists who have advised presidents and would-be presidents concede that it would be delusional to expect Romney, or any candidate, to parrot his advisers on every economic issue. An adviser's influence, they say, rises and falls on personal rapport with the candidate and on how well the economist frames proposals in political terms. The more a policy sounds like an electoral winner, the easier it is to sell.

"Many academics kind of have an unrealistic view of how a campaign works--their view of how it should work is like a Platonic philosopher-king," said Austan Goolsbee, who stepped down last year as chairman of Obama's Council of Economic Advisers to resume teaching at the University of Chicago. "The economist would say, 'Here are some policies; let's build a campaign around it.' That's not how it works." In truth, Goolsbee said, the economic adviser is part of a pit crew--"one of the guys who jumps over the wall with the tire tool and a gas can in the NASCAR race. But Dale Jr. is the guy driving the car.... The economists would do well to remember that. So would the people who cover the economists."


Even so, friends and colleagues of Hubbard and Mankiw say they have reason to believe that the two economists could wield a particular power over Romney's mind. (Both declined requests for an interview.) After Hubbard helped persuade George W. Bush to eliminate taxes on stock dividends, The Weekly Standard's Fred Barnes described him as "the most influential chairman of the Council of Economic Advisers in two decades." His star soared among conservative economists, thanks in part to the salesmanship and persistence you'd expect from a man who peddled shoes as a child in central Florida and made financial trades in his youth.

"If you bat .300, you're going to win the National League [batting title]. But if you bat .100 as an economist in D.C., you're going to go to the Hall of Fame." So mused conservative economist Douglas Holtz-Eakin, who was the top policy adviser to John McCain's 2008 presidential campaign and then worked for Hubbard in the Bush White House. "Glenn is a singular figure in his generation, in terms of his academic talents and his ability to influence policy," Holtz-Eakin said. "He bats better than .100."

Similarly for Mankiw, according to Weinzierl, who worked for him in Washington and has coauthored several papers: "Once he explains how he thinks about an issue, it's hard to think about it in any other way."

Not that their records are spotless. While consulting for Fannie Mae in 2003, Hubbard penned a research paper concluding that a liquidity crisis was a "remote possibility"--that is, until the housing market crashed five years later. The anti-Wall Street documentary, Inside Job, portrayed him as a villain. He, and then Mankiw, chaired the Council of Economic Advisers amid the slowest job growth for any presidency since the government started keeping track during the Great Depression.

Both economists, though, command respect across the ideological spectrum. "Those guys make me feel better about Romney," said Jared Bernstein, who served as Vice President Joe Biden's chief economist and has returned to the liberal Center on Budget and Policy Priorities. When trying to project a possible Romney presidency, Bernstein advised, "I would look pretty closely at the kinds of ideas that ... economists of a caliber of a Mankiw and a Hubbard are talking about. They're generally in a wheelhouse that government economists like me would recognize. That's a pretty different wheelhouse than where the tea party hangs out."

The attributes that could boost their influence in a Romney White House, however, could pose a political danger to the candidate as he pursues the Republican nomination. Romney must keep hanging in the tea party wheelhouse if he hopes to attract GOP primary voters, and he'll need to keep his base energized if he wants to defeat Obama in November. If he does wind up as the nation's 45th president, former White House economic advisers say, his political team will constantly remind his economic team of the promises that Romney made on the campaign trail. Smaller ones, or those that matter mainly to specific constituencies, will be easier to walk back; those might include replacing Bernanke with an inflation hawk. But promises in high-profile areas, such as housing, are harder to break.

"As a general proposition, you trust what the candidate says, not what academic advisers believe," said Robert Shapiro, a former campaign and White House adviser to President Clinton who now runs Sonecon, an economic-consulting firm in Washington. "The notion that what a candidate says on the economy during the campaign is disposable is just not true." Economists' influence is greatest, former presidential advisers note, when something new takes place--say, another recession at the start of 2013.

Mankiw, for one, has openly pondered a version of the Romney Conundrum. In a 2006 op-ed in The Wall Street Journal that called for raising the gas tax, he wrote, "Is it conceivable that the policy wonks will ever win the battle with the campaign consultants?"

Well, consider this: Romney, too, went on to embrace a form of gas tax. In his book No Apology: The Case for American Greatness, he called for a gasoline or carbon-emissions tax that would be fully offset by reduced payroll taxes. "Higher energy prices would encourage energy efficiency across the full array of American business and citizens," Romney wrote. "It would provide industries of all kinds with a predictable outlook for energy costs, allowing them to confidently invest in growth."
