Willing to Listen

Good News:

Mindful of his predecessor, Barack Obama seems to be trying harder to make sure he hears all sides. On the night of April 27, for instance, the president invited to the White House some of his administration's sharpest critics on the economy, including New York Times columnist Paul Krugman and Columbia University economist Joseph Stiglitz. Over a roast-beef dinner, Obama listened and questioned while Krugman and Stiglitz, both Nobel Prize winners, pushed for more aggressive government intervention in the banking system.

That sort of outreach is admirable—but it would be a mistake to make too much of it. A couple of hours of conversation is no substitute for methodical inquiry and debate. At present, Obama's economic advice is closely controlled by his chief economic adviser, Larry Summers, who acts as a kind of gatekeeper, determining what Obama sees and hears—and what he does not. Paul Volcker, the wise old hand who ran the Federal Reserve in the 1980s and whipped inflation, chairs an advisory panel that does not appear to do much advising. "Our ruling intelligentsia in economics runs the spectrum from A to A-minus," says a member of the Congressional Oversight Panel on the banking bailout, who requested anonymity when speaking about the administration. "These guys all talk to each other, and they all say the same thing."

It's admirable for Obama to hear these differing points of view, and we can only hope that he took them into account. And especially since those who have acted as "gatekeepers" for his economic policy seem to be dismissing Krugman/Stiglitz's ideas out of hand, it's particularly awesome that he had them to a dinner without his pro banking industry filter present.

That being said, it all comes down to what he does. While this shows he's a very cool and intellectually curious human being, it's anyone's guess what effect (if any) this will have on his current horrific banking policy.

Mike Lux has a very thoughtful post on where those of us who support Obama yet oppose his banking plan go from here:

Most of us who have been working on the banking issue from the restructuring side of things (meaning put the big banks into receivership and break them up into smaller components that are no longer too big to fail), including people I know far closer to the administration's economic team than I am, have come to the conclusion that the administration's policy regarding the big Wall Street financial institutions is fairly set for the time being. There are a variety of reasons Obama has chosen this path - the fact that Geithner and Summers really believe it is better to resuscitate the big banks rather than to fundamentally restructure them, the belief (reinforced by the Senate's recent failure on cramdown legislation) by senior administration officials that despite the populist anger among the general public that there is no political will in DC to take on the big banks, the reality that most of the media's shallow interpretation about whether something works is whether the Dow Jones goes up the day the plan is announced. But regardless of the reasons, this is the reality we are living with. Obama has clearly chosen a path, and those of us with a different idea about how to work on these issues have to live with the fact that we have lost the debate, for now, inside the administration. The question now is: what do we restructuring advocates do now?

I think there are two ways going forward that are constructive. The first is to really invest in long-term organizing and institutional building on the finance issue. While it is disappointing that Obama hasn't used this economic crisis and the populist anger it invoked to more fundamentally change the system that brought us to this pass, it's not like finance issues are going away or recede in importance in years to come. Now is the time to build institutions with the grassroots, political, and intellectual firepower to battle the banks in the years to come. We clearly have a stable of economists and business people who get what is going on, including George Soros, Joseph Stiglitz, Paul Krugman, Dean Baker, Rob Johnson, Simon Johnson, Leo Hindery, and others. What we need is long term institutional political power to build the constituency that will fight this fight effectively.

Just as importantly, we need to work constructively with the Obama administration to be prepared with a plan B if what they are doing begins to show significant weaknesses. If, as we restructuring advocates fear, the Geithner/Summers plan does not work to rebuild the economy, and/or the plan is gamed by the big banks to create other AIG bonus style scandals, Obama will be forced to turn to a plan B. If that happens, as I wrote a few weeks ago, progressives should avoid going into I-told-you-so mode, and instead be ready with a strong progressive plan that they can push with the administration. The economic thinkers listed above ought to be working together right now to come up with a strong plan B option. If we can keep a constructive dialogue going with the White House, and mobilize our friends in Congress and in the media, such a plan has a chance of being adopted.

That's a good strategy, and I think what Lux describes is our best bet going forward. I really believe that the economic conditions will eventually force Obama to do the right thing here, and it's just a question of how much money we giveaway to the banks before the Administration comes to that realization.

Then again Obama might wake up one day, realize he's hired the same people whose beliefs caused the financial crisis, and think back to his dinner with two of the people who predicted it, and wonder why he didn't hire them in the first place.

If Obama is willing to solicit thoughts from George Will and Paul Krugman within a few months of each other, I'm pretty sure anything is possible.