National Review Online asked a group of economics experts to assess the Obama economic team.
I am very pleased by Obama’s economic appointments. They are all centrists for whom I have great professional respect. Frankly, they are a substantial cut above Bush’s current appointees in the same positions. But they have their work cut out for them. First, they face the worst economic crisis since 1929. Second, they are going to have their hands full fighting off the liberal special interests who view the crisis as a once-in-a-lifetime opportunity to spend like there’s no tomorrow.
For this reason, I view the appointment of Larry Summers as director of the National Economic Council as especially inspired. As everyone who knows him knows, Larry can be a bull in a china shop at times. But I think this quality is exactly what the person in this job needs. Larry’s personality, not to mention his extraordinary resume, will ensure that serious economic analysis underlies, or at least will be given fair consideration, in every Obama initiative. I think this is the best conservatives can hope for under the circumstances.
I think Summers will put his two cents into every Obama initiative, domestic or foreign. Don’t forget that Larry spent many years heading Treasury’s international-affairs office, which is like a mini State Department. And having an office in the West Wing ensures that Larry will have his fingers in every single pie going in or out of the Oval Office.
Personally, I think this is all to the good. The one thing missing is Cabinet rank. Obama can confer that upon anyone he chooses. He would be wise to elevate Larry Summers to Cabinet rank to ensure that his voice is heard wherever and whenever it needs to be.
— Bruce Bartlett was a White House economist in the Reagan administration and a Treasury Department economist in the George H. W. Bush administration.
After relentless bashing of the “Bush economic policies” and calls for “change you can believe in,” President-Elect Barack Obama has made a Treasury-secretary selection in Timoty F. Geithner that would — from all indications — scarcely be different from reappointing Henry Paulson to another tenure. As president of the Federal Reserve Bank of New York, Geithner has been, in the Washington Post’s words “a primary architect of the Bush administration’s response to the financial crisis” and “has worked closely with Treasury Secretary Henry M. Paulson Jr. to devise responses to the most critical events of the market turmoil.”
The Geithner nomination would be “more of the same” of the worst aspects of the Bush administration — more bailouts, more lack of transparency in the bailouts, and more corporate welfare.
Other than organizing bailouts Geithner’s resume is quite thin compared to that of others who have held the office he has been nominated to. As liberal columnist Robert Kuttner noted recently in The American Prospect, Geithner “has neither a doctorate in economics nor an M.B.A.” He has never been a corporate leader nor been a professor with a trail of published economic papers. Instead, Geithner’s career has been almost entirely in the bowels of the bureaucracy. He started at the Treasury Department in 1988 as a career civil servant before being appointed under-secretary of the Treasury for international affairs in 1999.
Geithner would not have even been under consideration had he not come to prominence in circumventing rules to arrange the bailiout of Bear Stearns’
creditors earlier this year, with $29 billion in backing from U.S taxpayers. According to accounts from both conservative columnist Robert Novak and the financial magazine Conde Nast Portfolio
, Geithner was the main instigator of the bailout, getting Paulson and Fed Chairman Ben Bernanke to sign on to his handiwork.
The Bear deal faced criticism from the Left and Right as both an abuse of Fed power and as a precedent that spread “moral hazard” leading to the further bailouts down the line — bailouts that Geithner would be heavily involved in, working hand-in glove with Hank Paulson. Novak wrote, “The Federal Reserve’s unprecedented bailout of Bear Stearns was crafted not at the White House or Treasury, but in secret by a New York central banker.” But Geither’s actions received similar criticism from former Fed Chairman Paul Volcker, an adviser to Obama who himself was considered for the Treasury job. In a speech to the Economic Club of New York, Volcker said the FEd took actions that “extend to the very edge of its lawful and implied powers, transcending certain long-embedded central-banking principles and practices.”
Given that bailouts are just about his only siginificant policy accomplishment, both the long-term implications of Geithner’s actions and the short-term lack of results in calming a nervous economy (indeed they may have exacerbated fears about the next shoe to drop) need to be heavily scrutinized at his confirmation hearing.
— John Berlau is director of the Center for Entrepreneurship at the Competitive Enterprise Institute.
James C. Capretta
Personnel is policy, it is often said. By that standard, we should be somewhat reassured by the team Senator Obama is assembling to implement economic policy in the new administration. Lawrence Summers, Peter Orszag, and Tim Geithner are all veterans of the Clinton era, and their public positions reveal a disposition to markets, free trade, and fiscal discipline.
But, at this unusual — really unprecedented — moment in our economic history, prior positions and past statements may not tell us much about what we can expect by way of policy in the future.
What’s most worrisome is that Senator Obama himself seems to have strong instincts toward policies which would hinder growth rather than hasten a rapid recovery. He is clearly not an ardent free-trader. He speaks the language of redistribution, not growth. He has yet to back off of any of his many proposals which would impose new burdens and taxes on businesses, thus slowing job creation (for instance, his “pay or play” health care mandate).
And then there is the matter of taxes. The newly emerging team favors reducing budget deficits, but none seem much inclined to do what is necessary to reign in the expansive federal enterprise. To them, fiscal discipline only means higher taxes. And there, the only uncertainty is when they will push for the massive tax hike they all favor.
— James C. Capretta is fellow at the Ethics and Public Policy Center and a former associate director at the Office of Management and Budget.
In spite of the impression the media, that President-Elect Obama’s economic team reflects an underlying “pro-market” orientation, they in fact are advocates of manipulating markets to generate outcomes more to their interventionist and welfare redistributive liking. The French have long called this “indicative planning”: use the tax system and the regulatory mechanism to induce the private sector to do what politicians and ideological special interests want. That is not the free market. They will manipulate the markets to bring about the “green” and pro-labor union outcomes that will have nothing to do with the outcomes we as consumers would have desired in a more competitive environment.
In addition, they are all on board to design and implement a vast deficit spending package that will end up doing far more harm than any good, by creating politically influenced public works jobs that will only last for as long as the government keeps spending money in particular ways. Also, they seem to be completely oblivious to the simple but vital question: where is the money coming from to fund what will end up being a total $1.5 trillion bailout and stimulus budget buster? An answer would be nice.
— Richard Ebeling is a visiting professor at Trinity College (Conn.) and senior fellow at the American Institute for Economic Research.
The Obama economic team is more moderate than I had feared. But instead of Hugo Chavez socialists, they are still hopeless liberals. They are going to try to solve the financial crisis with unprecedented Keynesian overspending and deficits, proven to fail, rather than Reaganite supply side economics, proven to work. They have a blind spot for global warming regulation and central economic planning for energy, which is enough to crush the economy by itself, and produce blackouts and gas rationing. In the long run this crowd will bring back ruinous inflation as well. Congressional leaders like Nancy Pelosi, Barney Frank, Ted Kennedy and others are truly crazy socialists not living in the real world, and will only further lead Obama’s team toward disaster. The American people will eventually wake up as a result and restore grown up capitalist economics. The only question is how much will they have to suffer before that happens.
–Peter Ferrara is director of entitlement and budget policy for the Institute for Policy Innovation.
Burton Folsom Jr.
The problem with Obama’s economic team, especially Timothy Geithner and Lawrence Summers, is not so much their ties to the Clinton administration, but their stronger ties to failed economic policies of the past. They support bailouts and put much confidence in a large “stimulus package” that will, they say, create jobs and protect American investments.