Thu Nov 6th, 2008 at 12:49:09 PM EST
Who Obama picks as a Treasury Secretary is going to tell us just about all we need to know about how far Obama is willing to break with the unfortunately named "neo-liberal" economic policies of free markets and free trade that have dominated U.S. economic policy since Ronald Reagan - even under Bill Clinton. At this moment, there is a diary on the recommended list on DailyKos, Summers' call for poisoning Developing World?, that quickly turned into a discussion of who might be an acceptable Treasury Secretary. Unfortunately, scanning through the DailyKos thread, it appears not too many people understand that the most important fight Obama can undertake -- with the financial system in ruins and the real economy sinking into depression (shadowstats.com reportedly now calculates the real U.S. unemployment to be approaching fifteen percent, with GDP shrinking at over two percent on an annual basis) - is to replace the reigning paradigm of "neo-liberal" economic policies with something more akin to Europe's social democratic policies.
At the very beginning of the DailyKos diary is a link to a Bloomberg report that includes a short list of people Obama is considering for Treasury Secretary and other economic policy positions. If the list reported by Bloomberg is accurate, then we are in for a huge disappointment, as Obama will have crippled his administration at the very beginning, and will be unable to respond effectively because he is simply unwilling to think outside the box of "neo-liberalism."
Let's run down the list name by name.
Larry Summers is pretty well critiqued in the original diary above, though failing to completelt and adequately outline the fundamental details of "neo-liberalism."
Timothy Geithner is president of the New York Federal Reserve Bank and is a career bureaucrat. As noted in comments here, he also worked for Kissinger & Associates - the shady but powerful influence-peddling frim run by Henry Kissinger. Geithner has been one of the three most important people, besides Paulson and Bernanke, in shaping the response to the financial crisis so far. If you therefore don't see immediately that the naming of Geithner would be a disaster, then you don't understand the true dynamics of the mess we are in. What Paulson, Bernanke, and Geithner have been trying to do is save the financial system as it existed before the crises began. In other words, they are trying to preserve the bubble economics that "neo-liberal" economic policies inevitably creates.
Robert Rubin, Clinton's Treasury Secretary you should know by now, is one of the key people who steered the deregulation of the 1980s and 1990s, which is what created the mess. (if you don't you need to read the New York Times and Washington Post articles from about two weeks ago that recounted some the history, which also discuss the role of Summers). Before serving under Clinton, he was co-chairman of Goldman Sachs. He now serves as chairman of Citibank. Unfortunately, Jared Bernstein, an economist at the EPI, recently co-authored a New York Times editorial with Rubin. My reading of it was that it was almost entirely Rubin, with very little of Bernstein in it. Why Bernstein agreed to it is beyond my understanding at this time.
Stirling Newberry summarized the editorial thus:
We need stimulus now, real wages need to rise in line with productivity, the benefits of trade must be used to offset the costs of trade - particularly to workers. But most importantly, and something that should have been obvious earlier: that the Wall Street and Main Street wings of the Democratic Party have the same interests. Wall Street provides liquidity and scale to Main Street, but ultimately Wall Street exists only if Main Street is better off with it than without it.
Newberry, I believe, has made a nice living working on or for Wall Street, so I think he is a good bit softer than I am. But then, Newberry is "successful," and I am not (i.e., I am constantly worrying about paying my bills and where the next dollar is going to come from; I suspect that Newberry is mostly free of these concerns). Personally, I would Let Wall Street Burn.
On the other hand, my own recommendation for Treasury Secretary would be -- Stirling Newberry.
Paul Volcker has emerged as a wise old man, and has gotten good mention in many of Bonddad's diaries - all of which I vehemently disagree with as I quite unpopularly explained here:
By the late 1970s, the U.S. economy was beset with stagflation, a condition which mainstream economics had never thought possible. Probably because mainstream economics was still thinking in terms of a functioning industrial economy. So, when Volcker became Fed chairman in August 1979, a number of basic U.S. industries were in bad shape, particularly the bedrock industries: automobiles, steel, and machine tools. One of the Big Three car makers, Chrysler, was near bankruptcy. At the same time, the Hunt brothers had attempt to corner the market for silver, but had failed and were failing to meet margin calls. What Grieder details in his book [The Secrets of the Temple: How the Federal Reserve Runs the Country] is how Volcker confirmed the fundamental shift in Federal Reserve policy of Burns, by choosing to help the Hunt brothers, while letting Chrysler twist slowly in the wind. (Congress soon afterwards arranged an emergency loan for Chrysler). . . Volcker had fundamentally altered the rules of the game: it was now "What's good for Wall Street is good for the country." And the real, physical economy could go to hell -- and it has, taking millions of decent paying jobs and much of American prosperity with it.
So, again, I don't think Volcker is a person that will help lead us to an alternative to "neo-liberal" economics.
The situation as I see it is that Obama has that all-important first year to get real change enacted and signed into law. But if he names as Treasury Secretary someone who truly rejects "neo-liberal" economics, the financial markets are going to react extremely negatively, hundreds of millions of dollars will flood into conservative think tanks like American Enterprise Institute, and all sorts of lying and misleading crap about "socialism" and "communism" is going to be created and flung by the wrong-wing screech monkeys - all in the service of preventing a move from "neo-liberal" economics, which will severely limit the freedom, influence, power, and more importantly, the profits, of Wall Street and the financial markets.
On the other hand, I believe that the wrong-wing campaign of lying and misleading crap about "socialism" and "communism" is going to occur no matter what Obama does, so I think he should just make the break with "neo-liberal" economics from the beginning, and incur the wrath and fury of Wall Street immediately by naming someone who clearly is not part of or sympathetic to Wall Street.