Monday, November 24, 2008


Obama's selling us out again! ... Or maybe he isn't. In the dead-tree New York Times today, this article about Barack Obama's economic inner circle carries the following subhead:

Obama Aides Reflect Clinton Centrism of the '90s

Except that what the article says is that, if by "centrism of the '90s" you mean belief in deregulation and balanced budgets, these guys don't really reflect the centrism of the '90s: Washington, [Robert Rubin] and his acolytes are calling for a new formulation to address the global economic crisis that Mr. Obama will inherit -- and rejecting or setting aside, for now, some of their old orthodoxies.

Instead of deregulation, Mr. Obama has sworn to usher in a period of re-regulation, to avoid the freewheeling risks that Citigroup and the rest of the financial industry undertook after Mr. Rubin, with [Lawrence] Summers, helped tear down the regulatory walls between banks, brokerages and insurance companies, and freed them to trade in unregulated and little-understood derivatives worth trillions of dollars....

Instead of balancing budgets, the Obama team will be going deeper into debt for at least two years by spending hundreds of billions of dollars more to stimulate the economy, without concern for deficits, for aid to the jobless, states and cities; tax cuts for workers; and job-creating construction of roads, schools and other public works....

So it's the Robert Rubin crowd, but it's not the old Robert Rubin approach. But the article suggests that the move to the center is striking, and is making some liberals despair -- even as some of those liberals explain that there's a limit to their despair:

... Liberals like [Jared] Bernstein [of the Economic Policy Institute] had long had an aversion to the kind of centrist economic policies of the Clinton years....

But Mr. Bernstein's past differences with Mr. Rubin have so softened that the two men recently wrote a column together about their new common ground on spending, regulation and trade protections for workers.

As for Mr. Summers, he has "truly evolved," Mr. Bernstein said, based on his reading of Mr. Summers's columns in the Financial Times this year. Both men have been advisers to Mr. Obama, and at a recent meeting, Mr. Bernstein recalled: "I told him, 'Boy, Larry, your views on trade, on income inequality, on stimulus spending, they're approaching ours at E.P.I.' And he sort of huffed and puffed, and said, 'Oh well, changing circumstances.'"

This is quite similar to what a New York Times Magazine article last summer (before the current meltdown) told us about the '90s battle between Rubin and Robert Reich, and about Obama's perspective on that battle:

...To understand where Obama stands, you first have to know that, for 15 years, Democratic Party economics have been defined by a struggle that took place during the start of the Clinton administration. It was the battle of the Bobs. On one side was Clinton's labor secretary and longtime friend, Bob Reich, who argued that the government should invest in roads, bridges, worker training and the like to stimulate the economy and help the middle class. On the other side was Bob Rubin, a former Goldman Sachs executive turned White House aide, who favored reducing the deficit to soothe the bond market, bring down interest rates and get the economy moving again. Clinton cast his lot with Rubin, and to this day the first question about any Democrat's economic outlook is often where his heart lies, with Reich or Rubin, the left or the center, the government or the market.

Obama has obviously studied this debate, and early on during the flight to Chicago, he told me a story about Reich and Rubin. The previous week, Obama convened a discussion with a high-powered group of economists and chief executives. He was sitting at a conference table, with Rubin two seats to his left and Reich across from him. "One of the points I raised," Obama told me, "is if you just use you, Bob, and you, Bob, as caricatures, the truth is, both of you acknowledge the world is more complicated." By this, Obama didn't simply mean that their views were more nuanced than many outsiders understood. He meant that both have come to acknowledge that the other man is, in part, correct. The two now occupy more similar ideological places than they did in 1993. The battle of the Bobs may not be completely over, but it has certainly been suspended.

Among the policy experts and economists who make up the Democratic government-in-waiting, there is now something of a consensus. They agree that deficit reduction did an enormous amount of good. It helped usher in the 1990s boom and the only period of strong, broad-based income growth in a generation. But that boom also depended on a technology bubble and historically low oil prices. In the current decade, the economy has continued to grow at a decent pace, yet most families have seen little benefit. Instead, the benefits have flowed mostly to a small slice of workers at the very top of the income distribution. As Rubin told me, comparing the current moment with 1993, "The distributional issues are obviously more serious now." From today's vantage point, inequality looks likes a bigger problem than economic growth; fiscal discipline seems necessary but not sufficient....

So these are centrists who aren't as centrist as they used to be. These are centrists who don't think the centrism of the '90s applies today. These are centrists who now find common ground with the liberals who've often butted heads with them.

I can live with that.

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