Shadow Government

What's in a Name? A Valentine for the National Security Council Staff.

On a Valentine's Day bereft of roses, one is reminded of Shakespeare's question, "What's in a name? That which we call a rose by any other name would smell as sweet " -- or, more in Shadow Government's bailiwick, would a National Security Council (NSC) staff smell as good as a National Security Staff (NSS)? National Security Advisor Susan Rice thinks the NSC staff would be sweeter than the NSS, and I am inclined to agree with her. 

Rice's predecessor, Tom Donilon, thought otherwise and, when he was deputy national security advisor, helped arrange for the staff to have a new name -- the National Security Staff -- which would reflect the blending of the decades-old NSC staff with the more recent Homeland Security Council staff. While the idea of working more closely together was a good one, the mechanism of the symbolic name change was somewhat unfortunate.

Many of the costs were minor -- some transaction costs and some confusion -- but in general the Beltway responded the way it always responds when a new bit of jargon is introduced: People scrambled to show that they were "in" and "current," so took to using it freely, if not merrily.

However, the benefits seemed even more minor. After all, you don't create a seamless staff by giving it a single name; you create it by having a clear, uncomplicated chain of command. You don't get better coordination across disparate units through labels; you get it through streamlining, close daily contact, and joint projects.

Team Obama seems to have come to this same conclusion, for after announcing in 2009 that the name change was needed to foster better cooperation, the White House this week boasted that the staffs could go back to their old, differentiated names, precisely because of "the very successful merger of the two organizations." In a cheery and breezy blog post, the NSC staff spokesperson announced, "Given that the merger has done just that, and we are well aligned and organized to meet complex 21st century threats with the re-organization, we can revert to our historic and well recognized name, while maintaining a strong sense of cohesiveness and unity in supporting the President and the principals on his national security team."

Perhaps, but one suspects that something else was also weighing in the balance. Weeks ago, Rice signaled that she was working to go back to the old name, and this move was highlighted in a flattering piece crafted to show how Rice was breaking with the more contentious and turbulent tenure of her predecessor. The move would be a gesture to the staff, who did not like the new name and who needed bucking up since morale had suffered under Donilon's tenure.

I did not like the NSS nomenclature, though for admittedly parochial reasons. I thought it created needless confusion with another well-established NSS acronym, the National Security Strategy, which I worked on as an NSC staffer in both the Bush and Clinton eras. And like other alums, I did not appreciate having my title viewed as anachronistic and obsolete. (Perhaps I am overly sensitive to this sort of thing since my alma mater, Lehigh University, changed its mascot from Engineers to Mountain Hawks!) 

But even a crusty alum like me recognizes that performance matters more than labels, so while I applaud the name reversal, I am more interested in what Rice will do to reverse other trends. Rice has a daunting task ahead of her in restoring staff morale when the principal lines of strategy that her staff is working on are in trouble. One of the lingering effects of the debate over Robert Gates's controversial memoir is the renewed attention it placed on the familiar complaint of the White House's micromanagement and mismanagement of the foreign-policy process. Even President Barack Obama is admitting that his Syria strategy is failing. And when the president has to warn a friendly ally on a state visit, then it is fair to say that the Iran policy is going wobbly too.

This is a challenging time to head the NSC staff. Changing the name will not make that job any harder, but it won't make it much easier either.

Photo: Brendon Thorne/Getty Images

Shadow Government

Why Are They Yellin' at Yellen?

The new chair of the Federal Reserve, Janet Yellen, is far too smart to have thought the job would be easy. Yet she took office amid plentiful criticism of the U.S. central bank and calls for it to rethink its approach.

Yellen takes over the Fed as it works to extricate itself from a policy of extraordinary measures meant to boost the money supply. The Fed has gone from pumping $85 billion into the economy each month to $65 billion, with promises to reduce these purchases further (a policy known as the "taper"). Although we're well into the realm of unconventional monetary policy (quantitative easing), some of the old rules apply -- tighter monetary policy and the promise of more to come can draw money back from the far corners of the world.

That is what has happened. Markets such as Brazil, Turkey, and India all enjoyed inflows of foreign investment when global monetary policy was loose. The bout of U.S. tightening has led some investors to depart these markets, driving down their stock markets and their currencies and compelling some of them to raise interest rates to painful levels (which can have the effect of persuading those foreign investors to stay).

The renowned economist Raghuram Rajan, recently installed atop India's central bank, made a forceful case that the U.S. Fed should care more about how its policies affect emerging markets. "International monetary cooperation has broken down," he said. "The U.S. should worry about the effects of its polices on the rest of the world.… We would like to live in a world where countries take into account the effect of their policies on other countries and do what is right, broadly, rather than what is just right given the circumstances of that country."

He is not alone in this view. A Forbes contributor weighed in: "The Fed should not be 'going it alone' on monetary policy decisions of this magnitude.… It must take into account the state of the global economy. The Fed is in effect the central bank of the world. It is time it behaved like it."

Who could object to the idea of looking out for the well-being of other countries and adopting a global view?

Eswar Prasad, a professor of trade policy at Cornell University, offered a contrary view, focusing on the ability of emerging markets to look out for themselves. He also touched on the reason that Yellen will not accommodate the critics -- the Fed has its mandate set by law.

The problem she faces is a basic one: too few instruments, too many targets. The core Fed instrument is the money supply. In this time of more creative monetary policy, it can seem that the Fed has many instruments (regulation, different rates, public statements about the future, outright purchases of bonds and mortgages), but they really boil down to one -- how fast is the money supply expanding or contracting. Even if it were to remain blissfully ignorant of the world around it, the Fed would already have a potential difficulty. With this one instrument, it is supposed to meet two objectives: price stability and a reasonable level of employment. This is a bit different from many central banks tasked with only the first (also known as keeping inflation under control).

There is no tension if you have teetering prices and plunging employment. In such a case, the Fed tries to boost the money supply, since that should bolster both prices and economic activity (jobs). The problem comes if, for example, there are signs of inflation, but unemployment remains stubbornly high. Does one then cut money-supply growth to contain inflation (at the expense of jobs) or allow prices to rise to tamp down unemployment? As difficult as that balance can be, it is the one the Federal Reserve is formally required to take on.

The problem with adding international cooperation to the mix is that there are no new levers to meet the objective of prosperity in fellow countries. If the Fed committee (which Yellen chairs) determines that its U.S. objectives are best served by a $10 billion-per-month taper, then there is no legal basis for doing anything less (an adjustment which would presumably risk inflation). In practice, these calculations are not so precise, but the Fed has its hands full at home. It won't revise its solutions for concerns abroad.

In her testimony this week, Yellen promised nothing more than that she would keep an eye on global markets. This demonstrated an early mastery of the crucial Fed art of making empty statements. Tact without accommodation. Expect more of the same.

Photo: T.J. Kirkpatrick/Getty Images