Robert Kuttner, co-founder of The American Prospect and author of Obama’s Challenge: America’s Economic Crisis and the Power of a Transformative Presidency, is concerned that nearly every one of Obama’s picks for his economic team come from the same centrist club: the protégés of former Treasury Secretary and current Citigroup executive Robert Rubin.
As progressives, we can view President-Elect Obama’s emerging economic team in one of two ways. Either he has disappointed us by picking a group of Clinton retreads–the very people who brought us the deregulation that produced the financial collapse; the fiscal conservatives who in the 1990s put budget balance ahead of rebuilding public institutions. Or we can conclude that he has very shrewdly named a team of technically competent centrists so that he can govern as a progressive in pragmatist’s clothing–as he moves the political center to the left.Which will it be? Certainly, Obama’s press notices are phenomenal, and Republicans have almost been more enthusiastic than Democrats. When Arianna Huffington and I debated George Will and David Brooks on George Stephanopulos’s This Week Sunday morning, the conservatives were, if anything, more approving of Obama’s picks than we were.
On another channel, Republican guru Ed Rollins could be heard exulting about the Obama cabinet. I even had the out-of-body experience of debating Pat Buchanan on Hardball, to find that he thought Hillary Clinton was a terrific choice for Secretary of State. Obama now has the highest approval ratings on record for any president-elect, and he has the entire Republican pundit class in a swoon.
The honeymoon can’t last, of course, for Obama soon has to make very tough choices: whether to spend massive amounts of federal money to head off a depression; whether to embrace large-scale deficit spending as a temporary stimulus and then to go on to rebuild public investment so that we can have the 21st century infrastructure, energy, and human services that we need; whether to get serious about financial regulation so that the economy is never again brought down by excessive speculation. Whether to rescue the auto industry by imposing very tough conditions in exchange for public aid.
To do all of this right, he may need to nationalize a bank or two rather than just throwing public money at Wall Street, Paulson fashion. The requested aid to the auto companies exceeds the total value of their common stock. We need a plan for a conversion to energy-efficient cars, with a majority of public members on company boards in exchange for the public subsidy; this in turn violates norms of “free trade” by committing the sin of industrial policy. And we need direct government refinancing of distressed mortgages rather than aid to bondholders and banks.
Will Obama do any of this? He has reality on his side. He will have to think and move radically in order to save the economy. By January 20 we will be tottering on the edge of a depression. The entire conservative paradigm is now disgraced. Republicans may support a large initial stimulus package, for their districts are suffering along with Democrats. But they will want it be mostly in the form of tax cuts rather than public investment; and they are likely to oppose much of the rest of Obama’s program. The bolder it is, the more rightwing opposition Obama will invite. By January, the lkikes of George Will and David Brooks will be aghast (I hope).
Obama may describe himself as a pragmatist who transcends ideology and bridges differences. But there is no denying the plain fact that only progressive remedies, of large scale public spending and stringent government regulation, will fix what’s broken.
Which brings me back to Obama’s economic team. Leaks suggest that it will include Tim Geithner as Treasury Secretary; Lawrence Summers as a senior White House adviser, perhaps head of the National Economic Council; Peter Orszag as director of OMB; and Jason Furman, Austan Goolsbee and Jack Lew in other senior economic positions. All are relative centrists. And with the exception of Goolbee, the one thing that all have in common is that every one is a prot√©g√© of former Treasury Secretary and current Citigroup executive Robert Rubin. Even Hillary Clinton, as president, might have found a fresher group.
What kind of magic does this man Rubin have? He was one of the key Democratic architects of the extreme financial deregulation that brought the economy to this pass. At Citi, he was one of the grand strategists of the speculation in securitized loans and off-balance-sheet gimmicks that has brought Citi to the edge of bankruptcy. Yet he continues to fall upwards. Surely Barack Obama must have noticed that Rubin is a false prophet. So why is his entire senior economic group a Team of Rubinistas?