Insights from inside the Beltway

4/19/2012 - Cold data can be quite valuable in an environment where white-hot rhetoric threatens to drown out sober analysis, says Kellogg Professor Janice Eberly, who is currently serving as assistant secretary for economic policy of the U.S. Treasury.

“There’s so much rhetoric about policy. It’s easy to tell a compelling story, but having that story face the data is incredibly important,” said Eberly, who spoke to Kellogg students during April 16 visit back from Washington, D.C.

Policymakers “rely on economic research that’s been done by credible sources,” Eberly said. “Academics should never underestimate how important their work is.”

An excellent example of that principle is the debate around whether the Obama administration’s economic policies are making companies risk-averse and thus stifling economic growth, Eberly said.

“There’s lots of good research that says risk can have an effect on decision-making. That’s an argument to take seriously,” she said. But, she added, “A lot of what’s driving uncertainty is not specific to one country.”

The heightened partisanship of present-day Washington, D.C., doesn’t directly affect the economists who work under Eberly, whose job is to produce “unvarnished analysis,” she said. But in her own role as a political appointee working on hot-button tax- and budget-related issues, she is exposed to such crosswinds.

“That can be frustrating, not because people disagree,” she said. “There are legitimate disagreements. What’s frustrating is when the data analysis has gone off in some [unrelated] direction, and you’re not discussing the issue at hand. But the theater part of it — the distraction thing— is part of what you sign up for.” Her solution: “Stay on the numbers. It changes the discussion.”

Housing and foreclosures are among the topics in which Eberly has gotten immersed since she assumed her role last year. With the enormous flow of properties into foreclosure over the past few years, the administration is weighing a program that would encourage the conversion of those homes into rental properties, as for-sale prices are still falling in many areas while rents are rising.

“Jumping into housing issues at the time I did was very satisfying,” she said. “The market has changed. What should we be doing going forward?”

As for the current state of the labor market, Eberly said the unemployment rate of 8.2 percent for March remains unacceptably high, but “it’s clearly moving in a positive direction,” with the rate for college graduates about 4 percent. Addressing the Kellogg students in attendance, she added, “Going back to school is one of the best moves you can make for your employment prospects.”