Council of Economic Advisers: Meaning, History

What Is the Council of Economic Advisers (CEA)?

The Council of Economic Advisers (CEA) advises the President on macroeconomic matters and is comprised of a chair and two other members. The CEA’s aim is to advise and formulate economic policy for the White House and to ensure that all government departments promote the economic agenda of the executive branch.

Understanding the CEA

The Council of Economic Advisers is comprised of three notable economists: a chair, and two other members, each of whom is appointed by the President and approved by the Senate. Past chairs of the CEA include former Federal Reserve chairs Alan Greenspan, Ben Bernanke, and Biden administration Treasury Secretary Janet Yellen. Although many former members of the CEA have gone on to the Federal Reserve, the CEA is not tasked with determining monetary policy.

The CEA helps the President prepare the annual Economic Report of the President, which provides an overview of the nation's economic progress. The report also analyzes economic developments, reviews federal government policies and programs to make sure they promote a strong economy, and recommends practices that support American workers.

Due to its position in the Executive branch, the CEA is naturally oriented toward the formulation of fiscal policy, a favored Keynesian policy tool, rather than monetary policy, which is controlled by the Federal Reserve. The executive Branch also contains the Treasury department, which manages Federal revenues and spending, and the Office of Management and Budget, which produces the President's budget. The CEA helps the President formulate fiscal policy and these other agencies implement that policy.

History of the Council of Economic Advisers (CEA)

The CEA was formed during the Truman administration with the Employment Act of 1946 and initially promoted a Keynesian bent, referencing the economic vision of John Maynard Keynes and central to New Deal economic policies in the United States, which favor large-scale deficit spending as a means to stimulate the economy.

The dominance of Keynesian policy orientation on the CEA would continue through the 1970's, when President Richard Nixon paraphrased economist Milton Friedman's Time magazine column that "We are all Keynsians now." By the 1980's supply-side economic policy would generally replace the traditional Keynesian fiscal policy on the CEA during Republican administrations. Supply-siders on the CEA, such as Chair Greg Mankiw under President George W. Bush, generally have favored tax cuts as a means to stimulate economic growth rather than large spending projects.

The CEA Under President Biden

Under the Biden administration, the CEA is "charged with advising the President on economic policy based on data, research, and evidence." To that goal, the President has nominated a group of liberal economists, including Chair Cecilia Rouse. Rouse was confirmed by the Senate on March 2, 2021, and sworn in on March 12, 2021. Biden has also nominated Jared Bernstein and Heather Boushey as members.

Rouse is a respected labor economist with expertise in economic issues relevant to education, equality, and unemployment. She became dean of the Princeton School of Public and International Affairs in 2012 after joining the faculty 20 years earlier. Rouse served previously as a member of President Obama's Council of Economic Advisers from 2009 to 2011.

Bernstein was Biden's chief economist in the first years of the Obama administration, and Boushey is an economist and the CEO of the Washington Center for Equitable Growth.

The CEA Under President Trump

During the Trump administration, the CEA took a more conservative bent than in previous years and the chair was removed from a cabinet-level position.

Trumps first pick for the CEA Chair, Kevin Hassett, was a fiscal conservative and former policy advisor with former President George H.W. Bush and former President Bill Clinton. Hassett was appointed by former President Donald Trump in 2017, was confirmed by the Senate, and served until stepping down in July 2019.

After Hassett, the CEA had an acting chair, Swedish-born American economist Tomas J. Philipson, who was tapped by Trump to lead the organization in late June 2019 after serving as a member of the CEA since 2017. Philipson held the position until the end of June 2020.

Acting CEA Chair Tyler Goodspeed was then selected by former President Donald Trump to lead the CEA in June 2020 following the Philipson's resignation. Goodspeed is an American academic historian. Like Philipson, Goodspeed was a member of the CEA at the time he was nominated to become chair. Goodspeed resigned on Jan. 7, 2021.

CEA vs. National Economic Council (NEC)

The CEA is a key resource for economic issues between the White House and economic policymakers within the departments Labor, Commerce, and other government agencies. The CEA is part of the Executive Office of the President and the chair is currently a cabinet-level position, confirmed by the Senate.

The CEA contrasts with the National Economic Council (NEC). The NEC was established in 1993 to advise the President on U.S. and global economic policy. The NEC is part of the Executive Office of the President, but the Director of the NEC is not a cabinet-level position.

The NEC director is tasked with coordinating and applying the President's economic policy agenda in conjunction with a number of the administration's department and agency heads.

President Biden appointed Brian Deese as the director of the National Economic Council. Deese was previously the global head of sustainable investing at BlackRock Inc. and a senior fellow at the Harvard Kennedy School. Prior to that, Deese held several positions in the Obama administration, including the special assistant for economic policy to President Obama.

Council of Economic Advisers (CEA) FAQs

Why was the council of economic advisers created?

The Council of Economic Advisers was created as part of the Employment Act of 1946, with the intention of having a group of economic experts to make sure that the U.S. didn't sink into another Great Depression after World War II ended.

What does the council of economic advisers do?

The CEA advises the President on fiscal policy. They are tasked with providing unbiased economic analysis and usually come from an academic background. They are supported by a team of economists with expertise in areas such as international trade, labor, and healthcare.

Who are the current members of the council of economic advisers?

As of May 2021, Cecelia Rouse serves as the chair the CEA. Jared Bernstein and Heather Boushey serve as the other two members of the CEA.

What is the role of the CEA in the budget process?

The CEA prepares an annual Economic Report of the President that is released each February and provides detailed insight into the state of the economy and its growth prospects. The report summarizes and analyzes the economy's performance over the previous year using data and analysis and forecasts its growth for the year ahead. The report provides the critical economic background that supports the President's yearly budget.

The Bottom Line

The CEA is an agency that advises the President on matters of economic policy. It consists of a chair and two members and is supported by a group of economists with expertise in different areas of the economy.

The CEA prepares the annual Economic Report of the President, which both looks back at the economy over the previous year and looks forward to the year ahead. The economic report is used to help support the President's yearly budget.