How the President’s Economists Help to Shape Job Creation Policy

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Steps from the Oval Office sits a small but influential team of economists known as the Council of Economic Advisers (CEA).

Established by Congress after World War II, the CEA’s core mission is offering the President “objective economic advice” on fostering a strong American economy. Central to that mission is the perennial challenge of job creation.

This report explores the world of the CEA – its history, the competing economic theories it draws from, the policy tools it recommends, and the intense debates its advice often ignites. It provides a look at how the “president’s economic brain trust” shapes policies affecting the employment of millions of Americans.

What Is the CEA?

To understand how the White House approaches job creation, one must first understand the institution at the heart of its economic policymaking process. The Council of Economic Advisers is not a vast bureaucracy but a small, elite group designed to provide the President with direct, unvarnished economic analysis.

Born from Crisis

The Council of Economic Advisers emerged from collective economic trauma and resolve to prevent its recurrence. In the shadow of the Great Depression and the end of World War II, policymakers in Washington were determined to avoid a return to the devastating unemployment of the 1930s. This determination was codified in the Employment Act of 1946, landmark legislation that formally charged the federal government with the responsibility to “promote maximum employment, production, and purchasing power.”

To achieve this ambitious goal, the Act created the CEA within the Executive Office of the President, tasking it with providing the President and executive branch with expert, data-driven analysis needed to guide the economy toward these ends. The CEA maintains its official presence through its primary website hosted by the White House and the U.S. government portal, USA.gov.

The creation of the CEA was itself a political compromise. The original legislative text was steeped in Keynesian economics language, explicitly calling for the government to spend whatever was necessary to maintain full employment. This language was ultimately softened during congressional debate, leaving the CEA with a more analytical and advisory role rather than a direct mandate for specific spending policies. This foundational compromise embedded a tension that continues to define the Council: its mandate for objective analysis versus the political realities of serving a specific presidential administration.

The Power of Three

By design, the CEA is a small and agile organization. The Council is formally composed of three members appointed by the President and confirmed by the U.S. Senate. One is designated by the President to serve as the Chair. The law stipulates that each member must be “exceptionally qualified to analyze and interpret economic developments,” ensuring high expertise at the top.

This deliberately small structure is widely considered key to the CEA’s long-term effectiveness. It allows the Council to remain focused on the most critical issues facing the President, avoid bureaucratic inertia, and foster intense collaboration. Supporting the three members is a professional staff of senior economists, staff economists, and research assistants.

A defining feature of the CEA is its strong link to the academic world. Many staff members are distinguished economists on temporary leave from top universities, a tradition firmly established by former chair Arthur Burns in the 1950s. This steady flow of talent from academia is crucial to the CEA’s reputation for high-quality, non-partisan analysis, as staff are typically recruited for their expertise in fields like labor economics, public finance, or macroeconomics, rather than for their political affiliations.

The very structure of the CEA creates a persistent and fundamental challenge. While its mandate is providing “objective economic advice,” it operates within the highly political environment of the White House as an arm of the President’s team. This dynamic was evident early in its history during a contentious public debate between its first Chairman, Edwin Nourse, and council member Leon Keyserling. Nourse insisted that the CEA’s advice should remain confidential and strictly objective, while Keyserling argued that the Council had a duty to publicly advocate for the President’s policies, including deficit spending.

This core tension persists today. The CEA is frequently tasked with producing detailed reports that provide economic justification for an administration’s signature policies. These analyses are then often scrutinized by outside organizations, which may accuse the CEA of using overly optimistic assumptions to arrive at politically favorable conclusions. The Council’s credibility rests on its ability to navigate the fine line between being a source of neutral expertise and a loyal component of the President’s policy apparatus.

What the CEA Does Daily

The Employment Act of 1946 laid out five specific duties for the Council that continue to define its work today:

Assist the President in preparing the annual Economic Report of the President. This comprehensive document, transmitted to Congress each year, provides a detailed overview of the nation’s economic progress and outlines the administration’s policy goals.

Gather and analyze timely information on economic developments and trends. The CEA functions as the President’s in-house economic observatory, constantly monitoring data from sources like the Bureau of Labor Statistics and the Bureau of Economic Analysis to interpret the economy’s health.

Appraise federal programs to evaluate whether various government initiatives are contributing to the goal of maximum employment and economic stability.

Develop and recommend national economic policies. This is the CEA’s most direct role in shaping the agenda on issues like job creation, inflation, and growth.

Conduct studies and furnish reports as requested by the President. The CEA acts as an on-demand economic research team for the President, providing deep-dive analyses on specific policy questions.

At its core, the CEA’s primary function within the administration is serving as an “advocate for economic efficiency.” It is the voice in the room that consistently analyzes policy proposals through the dispassionate lens of costs, benefits, and market impacts. This role as an internal, expert evaluator makes the CEA a unique and influential body in U.S. economic policy formulation.

Competing Economic Playbooks

The advice that the Council of Economic Advisers provides to the President is deeply rooted in established, often competing, economic theories about what makes an economy grow and create jobs. Understanding these foundational philosophies is essential to deciphering why different administrations pursue starkly different policies to achieve the same goal of full employment.

The two dominant playbooks are demand-side economics, which focuses on empowering consumers, and supply-side economics, which focuses on incentivizing producers.

Demand-Side Economics: Putting Money in People’s Pockets

Demand-side economics, most famously associated with British economist John Maynard Keynes, is built on a simple premise: economic growth is driven by the demand for goods and services. The theory posits that businesses will not invest in new equipment, expand their operations, or hire more workers unless they are confident that customers will be there to buy what they produce. In this view, consumer demand is the economy’s engine.

According to Keynesian theory, free markets do not have a reliable self-stabilizing mechanism, especially during a downturn. When a recession hits, consumer and business spending plummets, leading to a vicious cycle of layoffs, reduced income, and even less spending. To break this cycle, demand-side theory calls for active government intervention to stimulate aggregate demand. This concept is often referred to as “priming the pump.”

The primary tools recommended by demand-side proponents are:

Expansionary Fiscal Policy: This involves the government using its budget to inject spending into the economy. This can take the form of direct government spending on public works and infrastructure projects, which creates jobs in construction and related industries. It can also involve targeted tax cuts for middle- and lower-income households, as these groups are considered more likely to spend any additional income, thus boosting consumption. The Earned Income Tax Credit (EITC), which provides a refundable tax credit to low-to-moderate-income working individuals and couples, is a classic example of a demand-side policy.

Expansionary Monetary Policy: This involves actions by the central bank (the Federal Reserve in the U.S.) to increase the money supply and lower interest rates. Cheaper borrowing costs are intended to encourage businesses to invest and consumers to make large purchases like homes and cars, further stimulating demand.

This economic philosophy was the intellectual foundation for Franklin D. Roosevelt’s New Deal and experienced a significant resurgence in the wake of the 2008 financial crisis, heavily influencing the Obama administration’s policies.

Supply-Side Economics: Freeing the “Job Creators”

In direct contrast to the Keynesian view, supply-side economics maintains that the most effective way to foster economic growth and create jobs is to increase the supply of goods and services. This theory places its focus not on the consumer, but on the producers – the businesses, entrepreneurs, and investors often referred to as “job creators.”

The core argument of supply-side economics is that producers will only invest, innovate, and expand – the activities that lead to hiring – if the economic environment is favorable. A favorable environment is defined by lower costs, fewer obstacles, and higher potential for profit. Proponents argue that high taxes and burdensome government regulations stifle this productive activity.

The primary tools in the supply-side playbook are:

Tax Cuts: Specifically, reducing taxes on corporations and high-income individuals. The theory is that lower corporate taxes leave businesses with more capital to reinvest in expansion, while lower taxes on capital gains and dividends incentivize investment. The intended result is that the benefits will eventually “trickle down” to the rest of the economy in the form of more jobs and higher wages.

Deregulation: The systematic removal of government regulations that are perceived as imposing unnecessary costs and burdens on businesses. By reducing “red tape,” the theory holds, companies can operate more efficiently and afford to hire more workers.

Promoting a Favorable Business Climate: This includes a range of policies aimed at fostering “free competitive enterprise,” a phrase explicitly mentioned in the Employment Act of 1946 itself.

How Philosophy Shapes CEA Advice

The choice between these two economic playbooks is fundamentally ideological. It represents a deep disagreement about the primary engine of economic growth and who should be the main target of government policy. Demand-side policies aim to build the economy from the “bottom up” or “middle out” by empowering a broad base of consumers. Supply-side policies aim to build the economy from the “top down” by providing incentives to a smaller group of producers and investors.

A President’s administration almost invariably enters office with a clear preference for one of these approaches, and this philosophy directly shapes the kind of analysis and recommendations produced by their CEA. For instance, a CEA in a Democratic administration is likely to focus its analytical firepower on modeling the “multiplier effect” of government spending – calculating how each dollar of stimulus spending circulates through the economy to generate more than a dollar in total economic activity.

Conversely, a CEA in a Republican administration will likely concentrate on “dynamic scoring” of tax cuts – modeling how lower tax rates might change behavior, encouraging more work and investment, and thereby offsetting some of the initial revenue loss.

This is where the seemingly objective science of economics becomes a key battleground. The public debate often presents the choice as a simple binary, but the CEA’s actual work hinges on complex models where the magnitude of assumed effects is paramount. For example, to justify a tax cut, the CEA must estimate the “labor supply elasticity” – a number that represents how much more people will choose to work in response to higher after-tax wages. This number is not a law of nature; it is a contested estimate.

A 2025 analysis from the American Enterprise Institute heavily criticized a Trump CEA report for using a labor supply elasticity of 0.75, a figure three times higher than the Congressional Budget Office’s estimate of 0.24. The AEI argued this choice of a much higher elasticity dramatically and unrealistically inflated the projected economic benefits of the proposed tax cuts. This illustrates how the real fight is often not just about which theory is correct, but about the specific parameters fed into the CEA’s models.

The Advisor’s Toolkit

Grounded in these competing economic philosophies, the Council of Economic Advisers analyzes a specific set of policy levers that a President can pull to influence employment. These tools fall into broad categories: fiscal policy, regulation, trade, and workforce development. The CEA’s role is evaluating how pulling these levers might affect the job market, providing the President with data-driven forecasts that form the analytical basis for major policy decisions.

Fiscal Policy: The Power of the Purse

Fiscal policy – the use of government spending and taxation to influence the economy – is the most direct tool for job creation. The CEA’s approach to fiscal policy clearly reflects the administration’s guiding economic philosophy.

During the Obama administration, which faced the Great Recession, the CEA’s work was a textbook example of demand-side theory in action. The Council was central to designing and justifying the American Recovery and Reinvestment Act of 2009 (ARRA), a massive $787 billion stimulus package. The CEA’s analysis relied heavily on estimating the Keynesian “multiplier effect.” Their models projected that the mix of tax cuts, aid to states, and direct government spending in ARRA would save or create approximately 3.5 million jobs by the end of 2010.

A core component of their analysis was a “rule of thumb” that a 1 percent increase in Gross Domestic Product corresponds to the creation of about 1 million jobs. The CEA also produced specific estimates for infrastructure investment, concluding that every $1 billion in federal highway and transit spending would support 13,000 jobs for one year.

In contrast, the CEA under President Trump championed a supply-side approach, focusing on the Tax Cuts and Jobs Act of 2017 (TCJA). The Council’s analysis forecasted that the law’s deep cuts to corporate and individual income tax rates would spur a wave of domestic investment, leading to a long-run increase in GDP and a substantial boost in real wages for the average worker.

Instead of the multiplier effect, the CEA’s justification for the TCJA relied on the concept of dynamic scoring. This method attempts to predict how tax cuts will positively change the behavior of businesses and individuals – encouraging more investment and work – thereby generating new economic growth that partially offsets the initial cost of the tax cuts.

This fundamental difference in analytical frameworks – multiplier analysis versus dynamic scoring – highlights the deep ideological divide in how the CEA approaches the same goal of job creation.

Regulation: Cutting Red Tape vs. Protecting the Public

For supply-side proponents, deregulation is a powerful tool for unleashing economic growth and job creation. The central argument is that government regulations impose significant compliance costs and operational burdens on businesses, which in turn discourages investment and hiring.

The Trump administration’s CEA placed heavy emphasis on this lever. In a major 2019 report, the Council estimated that the administration’s deregulatory actions would save American consumers and businesses approximately $220 billion per year and, over a period of 5 to 10 years, raise real incomes by an average of $3,100 per household. This analysis provided the economic rationale for the administration’s broader policy of reducing the federal regulatory footprint.

However, accurately assessing the employment effects of regulation is notoriously complex. While Executive Orders require federal agencies to analyze the costs and benefits of proposed rules, including their impact on jobs, these analyses often operate on the assumption that any job losses are merely temporary “transition effects” in an economy that will naturally return to full employment.

Critics argue this view is overly simplistic. They contend that a proper analysis should not just report the net effect on jobs but should detail the gross number of jobs gained and lost, as the displacement of 100,000 workers in one industry is not truly offset by the creation of 100,001 jobs in another. Furthermore, such analyses should consider the impact on wages, job quality, and the non-market benefits of regulation, such as improved public health and environmental protection.

The process of conducting a Regulatory Impact Analysis involves defining a baseline of what would happen without the rule, setting a time horizon, and conducting a benefit-cost analysis – all steps that are fraught with uncertainty and rely on significant assumptions.

Trade Policy: A Shifting Consensus

For decades, a bipartisan consensus held that free trade was a net positive for American jobs. The standard argument, frequently advanced by the CEA across different administrations, was that free trade agreements create high-paying jobs by opening up new foreign markets for American exports. The CEA under President Obama released a report arguing that empirical evidence shows FTAs do not cause an increase in the outsourcing of jobs and that middle-class Americans gain more than a quarter of their purchasing power from the lower-priced goods that trade makes available.

This long-standing consensus has been fiercely contested. Critics, particularly from labor-aligned organizations like the Economic Policy Institute, have produced extensive research arguing the opposite. Their analyses contend that the rising U.S. trade deficit, especially after the implementation of agreements like NAFTA, has led to the displacement of millions of U.S. jobs, particularly well-paying jobs in the manufacturing sector. They argue that the downward pressure on wages for non-college-educated workers, who must compete with lower-wage labor abroad, has been a major contributor to income inequality.

More recently, the official position from the CEA has begun to shift, reflecting a broader political realignment on trade. The CEA under President Biden has started to advocate for a “worker-centered trade” policy. This new framework explicitly acknowledges that the previous consensus on globalization too often ignored the negative consequences for blue-collar workers and their communities, which were hollowed out by outsourcing. The current approach seeks to strike a new balance: continuing to value trade flows while simultaneously using industrial policy, such as the investments in the Inflation Reduction Act, to protect and build up strategic domestic industries and their workforces.

Workforce Development: Investing in People

A final tool the CEA analyzes is direct investment in the skills of the American workforce. The federal government operates over 40 distinct employment and training programs, and the CEA has periodically been tasked with evaluating their effectiveness.

The findings have been a source of significant controversy. A 2019 CEA report, issued under the Trump administration, delivered a stark verdict: with the notable exception of Registered Apprenticeships, most government-funded job training programs were “largely ineffective.” The report claimed that few of these programs produced significant, lasting wage or employment gains for participants that would justify their cost to taxpayers.

This conclusion was immediately and sharply criticized by workforce development advocates. The National Skills Coalition published a detailed rebuttal arguing that the CEA report was “very wide of the mark.” The Coalition contended that the CEA’s analysis was fundamentally flawed because it failed to adjust federal spending data for inflation (which would have shown a dramatic decline in investment over decades), misinterpreted the mixed results of existing studies, and completely ignored a large and growing body of evidence on the success of “sector-based” training programs.

These programs, which partner closely with local employers to train workers for specific, in-demand jobs, have shown large and lasting impacts on earnings in rigorous evaluations.

Despite this debate, the CEA’s focus across administrations on the “skills gap” and the need for “reskilling” American workers highlights a persistent challenge. The choice of which programs to fund and how to structure them remains a key area of analysis and advice for the Council as it seeks to align the skills of the workforce with the evolving needs of the economy.

The analytical focus of the CEA often serves as a powerful indicator of an administration’s core economic and political priorities. The specific tools chosen for analysis are not deployed at random. They are selected and framed to provide the intellectual and data-driven justification for the President’s flagship initiatives. The Obama CEA’s deep dive into the methodology for calculating jobs created by the ARRA stimulus directly addressed the administration’s primary challenge of the Great Recession. Similarly, the Trump CEA’s extensive reports quantifying the benefits of deregulation and tax cuts were designed to support its key policy achievements.

How CEA Advice Gets Scrutinized

The Council of Economic Advisers does not operate in an echo chamber. Its analyses and forecasts, while influential within the White House, are immediately subjected to intense scrutiny from a robust ecosystem of competing analytical bodies. This public and often contentious debate, involving Congress’s own economic scorekeeper and a wide array of independent think tanks, serves as a crucial check on the CEA’s work.

CEA vs. Congressional Budget Office

The primary institutional counterweight to the CEA is the Congressional Budget Office (CBO). Established by the Congressional Budget Act of 1974, the CBO is a strictly non-partisan agency whose mission is providing the U.S. Congress with objective, impartial analysis to inform its economic and budgetary decisions. While the CEA serves the President, the CBO serves the 535 members of Congress, creating a natural and healthy tension between the executive and legislative branches.

This tension is most visible when the two bodies produce dueling economic forecasts for the same piece of legislation. The CEA’s projections, produced for the President, often reflect a more optimistic view of the administration’s policies. The CBO, in its role as an independent arbiter, frequently provides a more sober or conservative assessment.

A stark example of this divergence occurred during the debate over a legislative proposal known as the “One Big Beautiful Bill Act.” The CEA, under the Trump administration, released an analysis projecting that the bill’s tax provisions would boost long-run GDP by 2.4 to 2.7 percent and generate over $2 trillion in “dynamic feedback” – new revenue from accelerated economic growth. The CBO’s analysis was far more modest. It, along with other independent modelers, found that the bill would have a much smaller, and in some cases even negative, long-term impact on the economy.

This vast difference in conclusions stemmed directly from different underlying assumptions, particularly the CEA’s use of a much higher labor supply elasticity, which assumed workers would respond more dramatically to tax cuts than the CBO believed was realistic. This highlights the core difference: the CEA often acts as an advocate for administration policies, while the CBO acts as a neutral scorekeeper for Congress.

Think Tank Perspectives

Beyond the CBO, the CEA’s work is constantly dissected by a diverse ecosystem of private think tanks and research organizations, each bringing its own ideological perspective and analytical focus to the debate.

Center-Left and Progressive Critiques:

The Brookings Institution often acts as a thoughtful academic critic. Its scholars have praised the CEA for its tradition of hiring non-partisan staff and for its institutional role as an advocate for economic efficiency within the government. At the same time, they consistently highlight the fundamental challenge the CEA faces in maintaining its scientific objectivity while serving a political principal in the White House.

The Economic Policy Institute (EPI), with its focus on labor and the well-being of working families, frequently challenges the CEA’s conclusions on trade and wages. EPI has argued that CEA reports on free trade agreements are fundamentally misleading because they tend to tally only the benefits (such as lower prices for consumers) while systematically ignoring or downplaying the costs, which EPI identifies as significant job losses in manufacturing and downward pressure on wages for the majority of American workers.

Conservative and Libertarian Critiques:

The Heritage Foundation often critiques CEA reports for what it sees as overly optimistic, “rosy” conclusions based on unfounded assumptions. In a notable critique of a CEA report on health care reform, Heritage argued that the Council simply assumed, without any justification, that reforms would achieve massive cost savings without any degradation in the quality of care – a conclusion Heritage deemed a “best-case scenario” presented as a certainty.

The American Enterprise Institute (AEI) is known for its rigorous methodological critiques from a conservative viewpoint. Its detailed analysis of the CEA’s OBBBA forecast broke down the CEA’s model and argued it was flawed for three main reasons: it ignored the negative economic effects of the bill’s tax increases, it failed to account for the impact on new investment, and it used a labor supply elasticity assumption that was far outside the economic consensus.

The Cato Institute, from a libertarian perspective, has criticized the CEA for what it considers flawed economic logic. During the Trump administration, Cato scholars took aim at the CEA’s theories on international trade, arguing that its focus on trade deficits was misguided and that its promotion of a plan to devalue the U.S. dollar was a “futile” and “dangerous” policy that would be economically disastrous.

This entire ecosystem of scrutiny functions as an essential, if informal, system of peer review for the CEA. When the Council releases a major report, it is not the final word. The CBO provides an official legislative-branch counter-analysis, while think tanks across the political spectrum immediately begin dissecting its assumptions and conclusions. This public vetting forces the administration to defend its economic reasoning and provides policymakers, journalists, and the public with a more complete and balanced range of potential policy outcomes.

While often contentious, this system of checks and balances is crucial for democratic accountability, preventing any single, potentially biased economic forecast from dominating the policy debate.

Job Creation Strategies Across Administrations

The true impact of the Council of Economic Advisers can be seen by examining its work across different presidential administrations. The economic challenges and ideological priorities of each President dictate the focus of their CEA. By reviewing the CEA’s annual Economic Report of the President and other key analyses across recent history, a clear picture emerges of how its advice on employment has evolved.

The Clinton Years: Investing in People and Technology

The CEA under President Bill Clinton operated during a period of rapid technological change and the longest sustained economic expansion in U.S. history. The administration’s economic philosophy, which it termed “middle class led growth,” was reflected in the CEA’s focus on policies designed to empower workers and invest in the future.

The key job-creation policies championed and analyzed by the Clinton CEA included a significant expansion of the Earned Income Tax Credit to boost the incomes of low-wage workers, an increase in the federal minimum wage, and a landmark welfare reform bill aimed at moving recipients into the workforce with transitional support. The CEA’s analytical work also looked forward, studying the job-creating potential of the burgeoning telecommunications and information technology sectors, predicting a boom that would add over a million jobs.

During the two terms of the Clinton administration, the U.S. economy added 22.7 million new jobs, and the unemployment rate fell to a 30-year low.

The Bush Years: Tax Cuts and Ownership

The economic advisory team under President George W. Bush was guided by a firm belief in supply-side economic theory. The CEA’s primary focus was on creating a pro-growth environment by reducing the tax burden on individuals and businesses. The 2008 Economic Report of the President, released near the end of the administration’s second term, explicitly credited the tax cuts of 2001 and 2003 as a “key factor in promoting economic growth and job creation.”

The core of the Bush CEA’s advice centered on lowering tax rates on both labor income and capital income. The stated goal was to stimulate work effort, encourage greater innovation and entrepreneurship, and spur the business investment seen as the main driver of economic growth. The administration frequently pointed to a period of “52 uninterrupted months of job growth” as proof of the policy’s success.

However, this claim was heavily contested by critics, who pointed out that the overall economic cycle under the Bush administration produced the weakest net job growth of any since the end of World War II, a fact that became a central point of debate about the effectiveness of supply-side policies.

The Obama Years: Crisis Response and Recovery

President Barack Obama’s Council of Economic Advisers began its work in the midst of the worst economic crisis since the Great Depression, with the economy shedding nearly 800,000 jobs per month. Consequently, the CEA’s immediate and overwhelming focus was on crisis response, deploying a demand-side, Keynesian playbook to prevent a complete economic collapse and stimulate a recovery.

The centerpiece of this strategy was the American Recovery and Reinvestment Act. The Obama CEA was deeply involved in every stage of this policy, from modeling its potential impact to publicly defending its effectiveness. The Council’s detailed analyses projected that the stimulus would save or create millions of jobs that would otherwise have been lost.

As the immediate crisis subsided, the CEA’s focus shifted to further job creation proposals, such as the American Jobs Act, which included investments in infrastructure and aid to states but was largely blocked by Congress. Despite the slow start to the recovery, by the end of the Obama administration, the economy had achieved the longest continuous streak of private-sector job creation in American history.

The Trump Years: Deregulation and “America First” Trade

The CEA under President Donald Trump returned to a vigorous supply-side agenda. The 2020 Economic Report of the President attributed the historically strong labor market – which saw the unemployment rate fall to a 50-year low – to what it called the “foundational pillars” of the administration’s economic policy: tax cuts, deregulation, energy independence, and the renegotiation of trade deals.

The Council’s work was central to providing the economic justification for these pillars. It produced extensive analyses on the pro-growth effects of the Tax Cuts and Jobs Act and the economic benefits of its aggressive deregulatory agenda. The Trump CEA also played a key role in defending the administration’s shift away from the long-standing consensus on multilateral free trade, arguing that a more protectionist, “America First” approach was necessary to protect domestic industries and workers.

The Biden Years: Industrial Policy and a Tight Labor Market

The Council of Economic Advisers under President Joe Biden has operated in the unique economic environment of a post-pandemic recovery, characterized by both rapid job growth and a historic battle with inflation. The administration’s narrative, supported by CEA analysis, points to the creation of 2.7 million jobs in 2023 alone, with the unemployment rate holding consistently below 4 percent.

The Biden CEA’s advice reflects a strategic shift toward a modern industrial policy. This approach is embodied in legislation like the Inflation Reduction Act and the CHIPS Act, which use targeted investments and tax incentives to build resilient domestic supply chains in critical sectors like clean energy and semiconductors. This is coupled with the “worker-centered” trade policy that seeks to avoid the perceived mistakes of past globalization.

A significant intellectual challenge for the current CEA has been explaining the economic phenomenon of 2023, where inflation fell significantly without the large increase in unemployment that traditional economic models would have predicted. This has led to a re-examination of the Phillips Curve, a long-standing economic concept that posits a trade-off between inflation and unemployment.

For decades, the Phillips Curve guided the thinking of the CEA, suggesting that cooling inflation would require the painful cost of higher joblessness. The recent experience, where this trade-off has appeared to flatten or break down, represents a new puzzle for the President’s top economic advisors to solve.

The influence and effectiveness of the Council of Economic Advisers are not determined solely by the quality of its economic models or the intellectual brilliance of its members. The CEA’s impact is heavily mediated by the President it serves. As observers at the Brookings Institution have noted, presidents “differ markedly in their interest, appetite for, and understanding of economics.” A President who is deeply engaged with economic policy can empower the CEA and elevate its role in internal debates. In contrast, a President who is less interested may sideline the Council, rendering its advice moot.

The history of the CEA shows this clearly: from its early years under President Truman, where there was “little evidence that the president made much use of the council,” to administrations where the CEA chair was a central and trusted advisor.

The interpersonal dynamics between the CEA chair and the President – a factor often invisible to the public – are a crucial determinant of how economic advice translates into policies that create, or fail to create, jobs for the American people.

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