A Market-Oriented Economic Team

Washington Post: Obama Advisers Believe In Limited Spending And Free Markets, But President-Elect Is Now Calling For Neither

(Washington Post)  This story was written by Michael A. Fletcher.

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President-elect Barack Obama is assembling a deeply experienced team of top economic advisers whose key members firmly believe that limited government spending combined with free markets can create lasting prosperity.

But those advisers will take over at a moment that Obama says requires just the opposite: New financial regulations and generally unthinkable levels of deficit spending are in the offing as the new administration prepares to battle the most severe economic downturn since the Great Depression.

"Right now, our economy is trapped in a vicious cycle. The turmoil on Wall Street means a new round of belt-tightening for families and businesses on Main Street, and as folks produce less and consume less, that just deepens the problems in our financial markets," Obama said in introducing his economic team at a news conference yesterday. "These extraordinary stresses on our financial system require extraordinary policy responses."

To fashion the government's response, Obama has turned to people who have been associated with more market-oriented approaches. Timothy F. Geithner, 47, Obama's choice for Treasury secretary, is president of the Federal Reserve Bank of New York and has been a key player in negotiations aimed at saving some of the nation's largest financial institutions.

Lawrence H. Summers, whom Obama tapped to direct his National Economic Council, served eight years in the Clinton administration, including a year and a half as Treasury secretary. He has argued that the economic boom enjoyed during much of Clinton's presidency was largely a consequence of shrinking federal deficits.

Both Summers and Geithner are proteges of Robert E. Rubin, Summers's predecessor as Treasury secretary and current Citigroup director and counselor, whose views in favor of free trade, deregulation and reduced deficits have come to define the economic approach of the Clinton years.

Christina D. Romer, an economics professor at the University of California at Berkeley who is an expert on tax policy and the nation's recovery from the Depression, has been selected to lead Obama's Council of Economic Advisers. "She has the principal required characteristic of a CEA chair: the ability to clearly explain unpleasant and somewhat complex truths about the world to powerful people without making them mad," said Bradford DeLong, another Berkeley economist.

"These are great choices," said Doug Roberts, chief investment strategist for ChannelCapitalResearch.com, an investment research firm. "Right now, economics is the key thing. He is looking for experienced technocrats, despite the fact that some come from the right or the left."

Obama plans to ask his team to implement a huge stimulus plan -- estimates run as high as $700 billion over the next two years -- that would include money to rebuild crumbling bridges, roads and mass transit systems and jump-start a "green" economy by investing in alternative energy. Obama has said those initiatives are intended not just to carry the nation through the economic downturn but also to lay the foundation for a period of growth.

Obama says the infusion is needed to create or preserve 2.5 million jobs in an economy that this year shed about half that number, causing the nation's unemployment rate to spike to its highest level in 14 years. In the past, such heavy government spending on top of already-record budget deficits would raise strong objections, probably from the key members of Obama's economic team. But in the current climate, Obama's approach has been widely embraced.

"The world has evolved, and so has this group of folks," said Larry Mishel, president of the liberal-leaning Economic Policy Institute. "Issues of where people were eight to 10 years ago, that is just history. I'll tell you why: Right now, no one is talking about accelerating globalization. Everybody is talking about national health care. Nobody is talking about balancing the budget. Everybody is talking about rebuilding the labor movement. A higher minimum wage, all sorts of things that were problematic from an earlier period, are just not there anymore."

Some liberal economists wonder privately whether the past policy preferences of Obama's top economic advisers could prove problematic. But others say Obama's choices reflect his confidence in his ability to set the direction he wants them to pursue.

"The top member of the team is Barack Obama," said Harley Shaiken, a California labor economist. "And he has made it clear that the vision for the administration comes from the very top."

Some have already shown a willingness to adjust their approaches. Summers, 54, a Harvard University professor who advised Obama through the general-election campaign, was one of the early influential voices in favor of the stimulus package President Bush signed into law earlier this year. As the economy has continued to deteriorate, he has advocated a second package, which Obama hopes to implement soon after taking office.

After leaving the Clinton administration, Summers served five years as Harvard president, resigning after igniting a national controversy by raising the possibility that innate differences accounted for why fewer women succeed in math and science careers than men. As Obama's chief of the National Economic Council, he will coordinate much of the nation's economic policy.

Obama also named Melody C. Barnes, his campaign's senior domestic policy adviser, to be director of the White House Domestic Policy Council. Barnes is currently a top official in the Obama transition team. Previously, she was an executive vice president at the liberal Center for American Progress and, before that, a counsel to Sen. Edward M. Kennedy (D-Mass.).

Her deputy will be Heather A. Higginbottom, who worked on Obama's campaign, and is a former legislative director for Sen. John F. Kerry (D-Mass.).

Today, Obama is expected to name Peter R. Orszag, current head of the Congressional Budget Office, to lead the White House Office of Management and Budget. The selection of Orszag, 39, who has become an outspoken opponent of how medical services are allocated, is also evidence of the importance Obama intends to place on rethinking how Americans receive medical care.

"Substantial evidence exists that more expensive care does not always mean higher-quality care," he wrote in a director's note on the CBO Web site.

[clovisbuford]

Actually, most of them are quite patriotic. They remain here and pay 50%, sometimes even 90% of their income as taxes. Posted by machineguy at 01:06 PM : Nov 25, 200Actually I saw Warren Buffet on tv explaining the tax rate , and after He pays all his taxes legally , he pays an effective tax rate of about 17% , His secretary pays an effective tax rate of about33%.He not says he pays less taxes by law than he ever has,He also challenged any of the Forbes 400 of the richest Americans ,that if they could show proof they paid a higher % of their incomes than their secretary ,he would donate a million $ to the charity of their choice . That was last yr. I haven''t read anywhere he has had it challenged or had to pay it out . Warren buffet and Bill gates are fascinating ,. There are some great interviews with them online at Google video for free. Look for the charlie rose interviews , and in them they are interviewed together and separately , fascinating stuff.

[clovisbuford]

So, finally, with no other apparent options, that pwerful leader used his executive powers to declare confiscation from all the rich Jews. Then, he invaded Poland, and the France. Hitlers actions thus successfully redistributed the wealth of Europe.Posted by machineguy at 12:58 PM : Nov 25, 2008 Also in that same war in the 1940''s ,Americaas leaders decided they would pay for their war if it ws taht important and all would sacrifice Unlike the current war which is being fought on chinese credit , and the mantra "keep shopping" and passing on the 12 billion$ a month cost to our grandchildren. The USA had an effective tax rate 0f 94% on the top 1% of wealthy Americans in WW2 to pay for it . If we taxed the top 1% of Americans wealthy at 94% to pay for this war We would have been home less than a month after it started .O f the super wealthy , Warren buffet gets it as does Bill Gates . Buffet has said it is class war fare and his side is winning . He supports the estate tax (the death tax as truth challenged republicans call it)as does Bill Gates . Buffet says the middle class is what makes his success and anyone''s success in America possible and the rich are squeezing them out . There is a reason he is an Obama adviser

[clancy49]

I don''t see a need for a committee. The corporations need us the consumer more than we need them. They strangled us and now their consumerism is gone. Although they still keep trying to milk blood from a stone. Corporate Welfare has to go.
I don''t see why they have to complicate things in committee. This is what needs to be done KISS - Lower profit levels to a reasonable net profit like 25%, Cut consumer loan interest rates to a payable debt level like .02% daily periodic or about 8% fixed rate, invest and retool abandoned industry shops with green technology, return to protectionism, Stop immigration except student visas, build rapid transit skyways, replace electric company megaliths with affordable in home solar nano technology, replace the big 3 with community built solar electric cars, reduce fossil fuel consumption, use wind turbines, road turbines, methane plants, desalinatization plants, and tidal generators at local and community levels. Create community, this will decrease the Federal budget and debt and increase spendable income as well as local community employment. You don''t need a PhD to figure this out. You certainly don''t need a committee...................

[likeitis5050]

With all the sunshine being blown up Obama''s hindend during the campaign by the likes of Madonna, Oprah, and most of Wall Street, I would think the money he needs is just a phone call away and that they would HAPPILY level their playing fields to that of Joe the Plumber''s for the sake of being Obama''s BFFs!!!! Whoopi, Joy, Baba, and the prime time players of SNL and 99% of Hollywood...get ready to attach those "I Gave Happily and I''m Obama''s Favorite" pins prominently and for all to see and be envious of....real photo ops!!!

The economic meltdown could be over in a week if everyone who voted to have the patriotic smack down on the wealthy would just simply give it up. Why wait until it''s mandated and give Congress any opportunity to put their slimy spin on it when the real test of patriotism, based on the Obama/Biden platform, is to give it all before it''s a law!!! Unless the voters were all thinking this is for THEM TO DO and not ME...in which case I have to inhale deeply and let loose with HAHAHAHAHAHAHAAAAAAAAAAHHHHHAAAAH...NOW THAT''S COMEDY!!!

[McHineguy]

YEP, lets see how patriotic the wealthy are.. My bet is they only push patriotism when it is benefitting them, but if you ask them to sacrafice (even though after sacraficing they''''d still have more money then the majortiy of the citizens combined)
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Posted by ddaryl1 at 12:49 PM : Nov 25, 2008

Actually, most of them are quite patriotic. They remain here and pay 50%, sometimes even 90% of their income as taxes. Even though it would be a simple matter to set up life in a foreign country and use their extreme wealth to create whatever they need. Consider how easy it would be for Bill Gates to move Microsoft to India. At the current time those wealthy guys pay over 70% of our taxes. If they leave, we will have to pony up to make thi difference.

Finally, it doesnt matter to us what someone earns until they spend it. Why worry if they have a lot of dollars until they ask someone else to do things for them. Only then, does dollars become wealth.

[McHineguy]

I would then recommend Obama use some of those powers to effect a partial seizure of the assets of that class of people and from the "bucket''''o''''bucks" confiscated, take the $700B (or whatever it ends up costing) to finance his proposed stimulus so the we lower and middle income people as well as the less affluent "haves" are not left owing the bill for mitigating a mess we had no hand in making.


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Posted by LloydBest1 at 11:53 AM : Nov 25, 2008
there is precedent, its been done exactly this way before. Toward the late 1930''s the entire world was still in depression and not coming out. One of the civilized leaders saw that wealth was not distributed in his country the way it should be. Worse, when he enacted tax laws certain individuals would run across the border to circumvent his attempts to correct his countries economy. But, he was wise enough to know that wealth was not printed money or large bank accounts. Wealth is in the goods, the land, and the lifestyles of a people.

So, finally, with no other apparent options, that pwerful leader used his executive powers to declare confiscation from all the rich Jews. Then, he invaded Poland, and the France. Hitlers actions thus successfully redistributed the wealth of Europe.

[ddaryl1]

YEP, lets see how patriotic the wealthy are.. My bet is they only push patriotism when it is benefitting them, but if you ask them to sacrafice (even though after sacraficing they''d still have more money then the majortiy of the citizens combined) So with that in mind why not... NO CEO or Wallstreet big wig deserves 100,000% more money in a year then the average working wage... and what possible reason would anyone actually need that money when so many are desperae for work, deseprate to retire, and desperate for helath care they can depend on. Greed is one of the 7 deadly sins is it not

[lloydbest1]

Let''s consider for a moment the "National Security and Homeland Security Presidential Directive" His Georgeness signed into law in May of 2007. This grants a president extraordinary powers, over and above those granted him(her) by congress when dealing with national emergencies. These augmented powers allow the POTUS near or total dictatorial authority to rule by decree in the event of a catastrophic national emergency. The directive has already been upheld by the Supreme Court and will not go away when "O" assumes the White House in January.
The $700 billion the Obama team thinks will cost to stimulate the economy is money neither the typical American taxpayer nor the U.S. treasury has right now. There is, however, one group that collectively has several times that amount. That group consists of the wealthiest 5% of our private citizens, many of whom made their fortunes during the recent deregulatory frenzy.
If ever there is, or has been, a critical national emergency of catastrophic proportions, this financial crisis is it. I would then recommend Obama use some of those powers to effect a partial seizure of the assets of that class of people and from the "bucket''o''bucks" confiscated, take the $700B (or whatever it ends up costing) to finance his proposed stimulus so the we lower and middle income people as well as the less affluent "haves" are not left owing the bill for mitigating a mess we had no hand in making.