Wednesday, November 26, 2008

The Obama Econ Team

As Announced Monday:
  • Treasury Secretary: Timothy Geithner
  • Head of National Economic Council: Larry Summers
  • Council of Economic Advisors Chair: Christina Romer
  • Director of Domestic Policy Council: Melody Barnes
Let's start with the good: In Melody Barnes we have our first real life progressive in the Obama administration! She seems very passionate about immigration, income inequality, so I'm really looking forward to what she can accomplish in charge of the domestic policy council. In 2007 she wrote this:
Here at home there is urgent work to do to fight the historically high -- and growing -- gap between our richest and poorest citizens. While the mean income of households on the low end of the income spectrum -- the bottom 20 percent -- is just $10,655 a year, the income of the top twenty percent of households averages almost $160,000. That's 15 times as much. At the same time, according to the latest census figures, the middle class, beset with stagnant wages and mountainous debts, is shrinking. The sad fact is that one of our most cherished values as a society, namely equality of opportunity, is fading as a reality for far too many people. Economists have shown that a child born into a lower-income family has only a 1 percent chance of making it to the top of the income distribution, while children from prosperous families have a 22 percent chance. To restore fairness to our system, I will embark on a multi-faceted approach including increasing our investment in public education, promoting genuine health care reform, and backing a higher minimum wage.
Very Impressive to say the least. What about Christina Romer? Ezra Klein:
So far, Christina Romer, Obama's pick for chair of the Council of Economic Advisers, is attracting many more plaudits from the right than the left. Tyler Cowen, Will Wilkinson, Greg Mankiw, and Justin Fox are very pleased, as much of Romer's work centers on the injury taxation inflicts on the economy.
It seems like a pretty straight-forward pick, nothing that will rock the boat or differ much from Furman/Goolsbee/Summers ideologically.

Speaking of Larry Summers, here is what the economically centrist-right New York Times Editorial Page said about his and Geithner's appointments:
Both men, however, have played central roles in policies that helped provoke today’s financial crisis. Mr. Geithner, currently the president of the Federal Reserve Bank in New York, also has helped shape the Bush administration’s erratic and often inscrutable responses to the current financial meltdown, up to and including this past weekend’s multibillion-dollar bailout of Citigroup. Given that history, the question that most needs answering is not whether Mr. Geithner and Mr. Summers are men of talent — obviously they are — but whether they have learned from their mistakes, and if so, what.

We are not asking for moral mea culpas. But unless they recognize their past mistakes, there is little hope that they can provide the sound judgment and leadership that the country needs to dig out of this desperate mess.

As treasury secretary in 2000, Mr. Summers championed the law that deregulated derivatives, the financial instruments — a k a toxic assets — that have spread the financial losses from reckless lending around the globe. He refused to heed the critics who warned of dangers to come.

That law, still on the books, reinforced the false belief that markets would self-regulate. And it gave the Bush administration cover to ignore the ever-spiraling risks posed by derivatives and inadequate supervision.

Mr. Summers now will advise a president who has promised to impose rational and essential regulations on chaotic financial markets. What has he learned?

At the New York Fed, Mr. Geithner has been one of the ringmasters of this year’s serial bailouts. His involvement includes the as-yet-unexplained flip-flop in September when a read-my-lips, no-new-bailouts policy allowed Lehman Brothers to go under — only to be followed less than two days later by the even costlier bailout of the American International Group and last weekend by the bailout of Citigroup. It is still unclear what Mr. Geithner and other policy makers knew or did not know — or what they thought they knew but didn’t — in arriving at those decisions, including who exactly is on the receiving end of the billions of dollars of taxpayer money now flooding the system.

Confidence in the system will not be restored as long as top officials fail or refuse to fully explain their actions.
Well that's not exactly a ringing endorsement, and this is from people who agree with their economic ideology! And about that Ideology: (Also from the New York Times)
The president-elect’s choices for his top economic advisers — Timothy F. Geithner as Treasury secretary, Lawrence H. Summers as senior White House economics adviser and Peter R. Orszag as budget director — are past protégés of Mr. Rubin, who held two of those jobs under President Bill Clinton. Even the headhunters for Mr. Obama have Rubin ties: Michael Froman, Mr. Rubin’s chief of staff in the Treasury Department who followed him to Citigroup, and James S. Rubin, Mr. Rubin’s son.

All three advisers — whom Mr. Obama will officially name on Monday and Tuesday — have been followers of the economic formula that came to be called Rubinomics: balanced budgets, free trade and financial deregulation, a combination that was credited with fueling the prosperity of the 1990s.

But times have changed since then. On Wall Street, Mr. Rubin is facing questions about his role as director of Citigroup given the bank’s current woes. And in Washington, he and his acolytes are calling for a new formulation to address the global economic crisis that Mr. Obama will inherit — and rejecting or setting aside, for now, some of their old orthodoxies.
The Times even added a chart to make sure you got their point, how nice of them!
Add in nice things like Summer's nice note to Ken Lay About how "I'll keep my eye on power deregulation and energy market infrastructure issues." and you can guess I'm not a big fan.

It's at times that it saddens you even more that progressive economists like Dean Baker, Paul Krugman, James Gailbraith, Brad Delong, Josef Steiglitz aren't around to see this, because this would have been their time to clean up the mess that the conservative economics created.

Oh wait, you mean they're all alive and well, and no one asked them to be a part of the administration? So it's not like the Rubinites were the only ones left... Obama simply chose them over the people who actually got these things right in the first place?

Cause that makes sense. Honestly, I'm just glad I'm not a progressive economist because it's really hard to think of a more frustrating job. You can be right about just about everything from the housing bubble to our trade policy, and when "your" party comes in to power, they turn to the same old losers who screwed things up to begin with.

In the end, this somewhere around what I guessed Obama's economic team would look like. Aside from some popluist rhetoric here and there, these are the type of people he trusted throughout his senate career and his run for president, and so it makes sense that he'd want them crafting economic policy for his administration. I may think they suck (and I do), I'm not at all upset or disappointed the way I was with his Foreign Policy team. He's an economic centrist, and other than a few populist speeches towards the end of his campaign, it's not like he ever signaled anything wildly different.

But ending on something positive, here is a press release from the president of the Campaign for America's Future, Bob Borosage:
It's not the personnel, it's the policy. And on this, Obama has been clear. He's announced a massive recovery plan based on putting people to work with public investment in areas vital to our future.

The crisis we face makes Rubinomics irrelevant. Deficit spending must go up, finance must be re-regulated, trade imbalances must be reduced and manufacturing can no longer be scorned.

Obama is choosing experienced hands for the crisis, trusting that their experience does not impede the new thinking needed to get us out of this hole. He'll set the direction. And so far, he’s on course.
While I honestly don't know if I share Borosage's optimism, one thing that I do believe in is this quote from Brad DeLong:
"These are not moderate times. To be moderate now is to be radical. To be radical is to be moderate."
Hank Paulson probably never imagined he'd be taking equity in U.S. Banks, but when he was forced, he pulled the trigger. Desperate times might call for putting aside failed ideologies, enriching friends, and doing things that actually work. And those things that actually work are a hell of a lot further to the left of anything these people are proposing. But if this is the pragmatic administration we're being told it us, we just might see some very radical moves.

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