Obama's New Chief of Staff Backs Industrial Policy as Key to Innovation

William Daley, President Barack Obama's new chief of staff, is expected to bring a corporate mentality to the White House, improving discipline and, in a favorite Washington phrase, "making the trains run on time." And although setting science policy won't be part of his job, don't be surprised if he weighs in on one important aspect of federal research policy, that is, how to foster innovation to improve U.S. competitiveness.

Those views were shaped during his 3 years as secretary of commerce under President Bill Clinton. And last month, during a discussion at a Washington, D.C., think tank, Daley wasn't shy about describing what's wrong with current policies and what needs to be done.

"Unless you've been in the government, you can't understand how screwed up it is [on this topic]," Daley told his 1 December audience at a panel on U.S. innovation policy put on by the Center for American Progress. Looking at the sprawling department he headed from 1997 to 2000, he asserted that "there is a great need to move the boxes around; ... there has to be some reorganization around these issues."

To prove his point, he pointed to the National Oceanic and Atmospheric Administration (NOAA). "Everybody's always wondered why NOAA's there," he said, noting that NOAA, which makes up half the department's budget, doesn't really fit into Commerce's mission to promote U.S. business at home and abroad. "Everybody's heard the story that it's because [President] Nixon got ticked off at [Interior Secretary Walter] Hickel because his kid came out against the Vietnam War," he said. "And so, when NOAA was created [in 1970], he didn't want to put it in Interior."

Reorganization is just one of many "tough issues" that the government faces in its attempt to strengthen the nation's capacity to innovate, Daley said.

Other challenges include tax policy, entitlements, and trade. And he said that reform on all those fronts is long overdue. "Unless we get a consensus on them," he said, "we can move those boxes around, which we have to do—[Vice President] Al Gore tried it but it never stuck—but at some point there has to be a better focus on economic issues, and we need to get rid of a lot of the clutter. Otherwise," he warned, "we just can't function effectively." The current "mishmash" also affects our foreign policy, he asserted. Other countries are much better organized to deal with all these issues, he said, and the decentralized structure puts the United States at a disadvantage.

He acknowledged that adopting a new strategy could reopen old political wounds. "Yes, we'll run into the issue of industrial policy," he said. "But most other countries, that doesn't seem to bother them." And he suggested that the fight is worth making.

"Those of us who are free traders and pure market believers seem to back up whenever the question of industrial policy comes up for discussion," he said. "But the hole we put ourselves in won't be solved simply by rearranging the boxes. ... The rest of the world is not waiting for us to get our act together."