The following is a letter I wrote today, as a comment on Paul Krugman's blog (not sure if it passed moderation - might have been too long), expressing my frustration with recent progressive negativity about Obama - despite agreeing with a few of their points (Geithner and Summers, in particular).
------
Dr. Krugman,
Full disclosure to begin with - I am a wholehearted progressive, with a passion for political economy, who reads your column, as well as others (Dean Baker, occasionally Dani Rodrik and Simon Johnson) regularly.
Sometimes I wonder if we progressives, just as with hard-right conservatives, are too quick to judge moves on the surface without really analyzing them. While it is true that Obama hasn't done much to radically change the narrative, to book him as JUST a centrist seems a little harsh. To use the current example, the anti-deficit plans that have come out of the White House seem aimed at trimming excesses that don't benefit current programs or goals (e.g canning the F-22). The current deficit-reduction bill seems to be one of these, spun in a "fiscal responsibility" manner. Trimming $25 billion a year over the next decade (pocket change for the US Gov) from non-critical programs (both security and major entitlement programs are exempt) can help politically - but it can also free up some marginal cash for potentially high-multiplier initiatives (e.g. high-speed rail, other energy initiatives). It certainly isn't worth railing against, as if we were talking about revisiting FDR in 1936.
Obama is not a radical game-changer, but the ONLY candidate with the potential for that in the primaries was John Edwards. So what is he then? He's a consensus-builder - but one with an eye towards long-term goals. That means an emphasis on smart industrial policy initiatives which lead the market. This can be very beneficial - in particular when dealing with green energy, and attempting to rebuild the manufacturing sector of the US (or at least the non-financial sectors, generally). He is much more in favor of incentives to innovation, rather than restrictions on behavior, save in blatantly obvious areas (e.g. pre-existing conditions).
Lastly, why did we expect him to change the narrative overnight? For that matter, would a more polarizing figure (even one with excellent grassroots mobilization) be able to get anything done in Washington - when you yourself have pointed to the Blue Dogs as a major roadblock to reform? Obama may not have pushed as hard in certain places, but he hasn't been lying down on the job, either. We've gotten major credit-card reform, phased withdrawal from Iraq on a timetable, progress towards closing Gitmo, and a 2-year stimulus package worth 3% of GDP per year. Yes, we boosted troops in Afghanistan - but Obama was very clear about doing that during the election (and their is a case to be made for it, unlike Iraq). Yes, the stimulus was too small, but did we expect the American people to suddenly become educated Keynsians overnight? "Trillion" is still a number most people have trouble comprehending - my political economy students included.
Perhaps our strategy is wrong. We need to remember that, for all that grassroots support elected Obama, progressives - by definition - are not the mainstream of society. This means we need to take the longer view at times. Rather than automatically saying "this isn't enough, it isn't why we elected you," we should actively promote Obama initiatives that broadly match up with our ideals (admittedly, you have been doing this on Health Care). Constant criticism from left-wing pundits does not help Obama's political capital - and, Wall Street reform excluded (except the potential Voelcker rule) - Obama's agenda has been, broadly speaking, a progressive one.
Showing posts with label President Barack Obama. Show all posts
Showing posts with label President Barack Obama. Show all posts
Wednesday, January 27, 2010
Monday, December 7, 2009
Ben Bernanke, Alan Greenspan, and the 8 Trillion dollar bubble...
With Fed Chairman Ben Bernanke up for confirmation of his new term, it bears remembering that - although he wasn't known by the public at the time - now-Chairman Bernanke was on both the Fed Board of Governors (under Greenspan) and the US Council of Economic Advisors. As Dean Baker points out (and has repeatedly mentioned in the past), Bernanke thus bears a substantial amount of responsibility for not reigning in the rampant financial and real estate speculation that led to this whole mess in the first place.
In the midst of all the political changes associated with the Obama era, it is important to remember that the current crisis has its roots as far back as Clinton's second term. In fact, if there is one thing I object to about the Obama administration, it is that the current economic policy team has been in the halls of power for well over a decade, and has presided over the persistent deregulation of financial markets worldwide. Bernanke, Summers, Geithner, and Greenspan were largely responsible for many of the causes of the current mess. I previously posted a discussion of the domestic causes of the crisis here.
For a refresher, they were:
(1) Interest rates, since 1980s stagflation, were kept perpetually below 6%, even in boom periods. These low rates helped feed the dot-com boom, speculation in Mexico and Asia (and Russia) in the mid-1990s, and the bubbles preceding the current crisis.
(2) Deregulation of financial markets under Clinton, approved of and argued for by both Larry Summers and Alan Greenspan (and implicitly by Ben Bernanke, given the Fed's position at the time). This is eerily reminiscent of the problems surrounding nearly every major financial crisis since 1990 - including the Savings and Loan Crisis, the Mexican peso crisis, and the Asian Financial crisis.
(3) The persistent maintenance of a strong dollar vis-a-vis, particularly, the Chinese renminbi. This led to a persistent current account deficit, and related capital account surplus, fueling the speculative bubbles. Again, as Dean Baker has pointed out, these imbalances are well within our control (though his proposed solution might be a bit extreme). Incidentally, this is also why the "China will dump US debt" scare is a sham.
The imbalances discussed above are readily recognized by any graduate student in economics or political economy - in fact, some of my undergraduates with minimal economics training have noticed them as well. It is utterly inexcusable that Bernanke, Summers, et al. failed to recognize their importance, and such ignorance can only be explained by either (a) greed or (b) ideological blindness in the face of clear evidence. In the first case, these individuals are corrupt; in the second, they are wholly incompetent.
It is time we said enough is enough.
In the midst of all the political changes associated with the Obama era, it is important to remember that the current crisis has its roots as far back as Clinton's second term. In fact, if there is one thing I object to about the Obama administration, it is that the current economic policy team has been in the halls of power for well over a decade, and has presided over the persistent deregulation of financial markets worldwide. Bernanke, Summers, Geithner, and Greenspan were largely responsible for many of the causes of the current mess. I previously posted a discussion of the domestic causes of the crisis here.
For a refresher, they were:
(1) Interest rates, since 1980s stagflation, were kept perpetually below 6%, even in boom periods. These low rates helped feed the dot-com boom, speculation in Mexico and Asia (and Russia) in the mid-1990s, and the bubbles preceding the current crisis.
(2) Deregulation of financial markets under Clinton, approved of and argued for by both Larry Summers and Alan Greenspan (and implicitly by Ben Bernanke, given the Fed's position at the time). This is eerily reminiscent of the problems surrounding nearly every major financial crisis since 1990 - including the Savings and Loan Crisis, the Mexican peso crisis, and the Asian Financial crisis.
(3) The persistent maintenance of a strong dollar vis-a-vis, particularly, the Chinese renminbi. This led to a persistent current account deficit, and related capital account surplus, fueling the speculative bubbles. Again, as Dean Baker has pointed out, these imbalances are well within our control (though his proposed solution might be a bit extreme). Incidentally, this is also why the "China will dump US debt" scare is a sham.
The imbalances discussed above are readily recognized by any graduate student in economics or political economy - in fact, some of my undergraduates with minimal economics training have noticed them as well. It is utterly inexcusable that Bernanke, Summers, et al. failed to recognize their importance, and such ignorance can only be explained by either (a) greed or (b) ideological blindness in the face of clear evidence. In the first case, these individuals are corrupt; in the second, they are wholly incompetent.
It is time we said enough is enough.
Friday, November 28, 2008
Good Op-eds on Economic Policy & My Take
There have been quite a few excellent op-eds on economic policy over the past few days, due in large part to Obama announcing his economic team.
Paul Krugman on financial crises and the need for regulation: Lest We Forget
David Brooks on forcing stimulus to have a long-term strategy: Stimulus for Skeptics
Dean Baker on the selection of the current economic team: Geithner at Treasury: Can He Learn?
For a bit more innuendo on why this economic team might be suspect, see this article in the Washington Post: Familiar Trio at Heart of Citi Bailout
My Take:
On the one hand, I am somewhat heartened to see that Obama seems to have something of a long-term strategy attached to stimulus - green technology, infrastructure, and patching the holes in the safety net. I will note one caveat there - he has also mentioned "aid to local and state governments" but has not mentioned what the aid would be used for. Might I suggest local public transit initiatives as an excellent option? Connected with a real rail infrastrucure (at least in California and East of the Missisippi), a good network of local public transit would do a lot to solving energy problems and building integrated markets. There are still a number of major cities that lack a real metro system, for instance (Philidelphia is but one example).
On the other hand, I am worried that Obama has been so cautious in his selection of his economic policy team. I expected to see a few old hands in top policy positions - particularly Geithner. But I was also hoping to see Obama do a little reaching out to the left - the source of his core support. In fact, his economic team is arguable more conservative than Bill Clinton's - after all, Clinton had Joeseph Stiglitz has his chairman of the Council of Economic Advisors. Christina Roemer is a solid choice, giver her expertise on the Depression, but having all of the other top positions held by centrist figures (Summers, Voelcker, Geithner, and Goolsbee) makes one wonder exactly how much debate there will be on economic policy.
Furthermore, all of these gentlemen (excepting Goolsbee), have had a hand in serious policy blunders. Summers is well-known for his part in the deregulation leading to this crisis - he was Treasury Secretary when the bank holding provisions of Glass-Steagall were repealed, and when the SEC avoided regulating credit default swaps (at the behest of Hank Paulson when he was at Goldman Sachs, among others). Voelcker spearheaded the end of stagflation, but he did so by strangling the US economy and raising interest rates to ridiculous levels. In doing so, he also sparked the debt crisis in the developing world, known as the "Lost Decade" in Latin America.
Geithner, on the other hand, was a member of the team that ensured IMF austerity conditions would be attached to loans in the 1997-8 Asian crisis. In essence, he forced countries facing an outflow of investment capital to spend less on their economies and to raise their interest rates... and these were countries that had balanced their budgets for years (unlike the US). These policies are known as "pro-cyclical" in economics jargon, and they have the effect of exacerbating a pre-existing crisis. In fact, the country that recovered most quickly from the crisis was Malaysia, who ignored IMF advice and imposed controls on capital flight, cut interest rates, and increased spending. This is exactly the opposite of what the US is doing now, and the exact opposite of what economists recommend should be done in a crisis.
Whether these gentlemen have learned from the past twenty years of supposed "consensus" that led to this fiasco remains to be seen. Until I see proof that they have, however, I worry that any response to the current crisis will be luke-warm - too small and too short-term. That was the mistake FDR made in the Depression, and if we learn from history, we should not make the same mistake again.
Paul Krugman on financial crises and the need for regulation: Lest We Forget
David Brooks on forcing stimulus to have a long-term strategy: Stimulus for Skeptics
Dean Baker on the selection of the current economic team: Geithner at Treasury: Can He Learn?
For a bit more innuendo on why this economic team might be suspect, see this article in the Washington Post: Familiar Trio at Heart of Citi Bailout
My Take:
On the one hand, I am somewhat heartened to see that Obama seems to have something of a long-term strategy attached to stimulus - green technology, infrastructure, and patching the holes in the safety net. I will note one caveat there - he has also mentioned "aid to local and state governments" but has not mentioned what the aid would be used for. Might I suggest local public transit initiatives as an excellent option? Connected with a real rail infrastrucure (at least in California and East of the Missisippi), a good network of local public transit would do a lot to solving energy problems and building integrated markets. There are still a number of major cities that lack a real metro system, for instance (Philidelphia is but one example).
On the other hand, I am worried that Obama has been so cautious in his selection of his economic policy team. I expected to see a few old hands in top policy positions - particularly Geithner. But I was also hoping to see Obama do a little reaching out to the left - the source of his core support. In fact, his economic team is arguable more conservative than Bill Clinton's - after all, Clinton had Joeseph Stiglitz has his chairman of the Council of Economic Advisors. Christina Roemer is a solid choice, giver her expertise on the Depression, but having all of the other top positions held by centrist figures (Summers, Voelcker, Geithner, and Goolsbee) makes one wonder exactly how much debate there will be on economic policy.
Furthermore, all of these gentlemen (excepting Goolsbee), have had a hand in serious policy blunders. Summers is well-known for his part in the deregulation leading to this crisis - he was Treasury Secretary when the bank holding provisions of Glass-Steagall were repealed, and when the SEC avoided regulating credit default swaps (at the behest of Hank Paulson when he was at Goldman Sachs, among others). Voelcker spearheaded the end of stagflation, but he did so by strangling the US economy and raising interest rates to ridiculous levels. In doing so, he also sparked the debt crisis in the developing world, known as the "Lost Decade" in Latin America.
Geithner, on the other hand, was a member of the team that ensured IMF austerity conditions would be attached to loans in the 1997-8 Asian crisis. In essence, he forced countries facing an outflow of investment capital to spend less on their economies and to raise their interest rates... and these were countries that had balanced their budgets for years (unlike the US). These policies are known as "pro-cyclical" in economics jargon, and they have the effect of exacerbating a pre-existing crisis. In fact, the country that recovered most quickly from the crisis was Malaysia, who ignored IMF advice and imposed controls on capital flight, cut interest rates, and increased spending. This is exactly the opposite of what the US is doing now, and the exact opposite of what economists recommend should be done in a crisis.
Whether these gentlemen have learned from the past twenty years of supposed "consensus" that led to this fiasco remains to be seen. Until I see proof that they have, however, I worry that any response to the current crisis will be luke-warm - too small and too short-term. That was the mistake FDR made in the Depression, and if we learn from history, we should not make the same mistake again.
Sunday, November 23, 2008
Update: Cabinet announcements
Here's the most recent list of cabinet announcements:
Economy:
Treasury: Timothy Geithner (Current President of the NY Fed, helped craft bailout plan)
Chief of White House National Economic Council: Larry Summers (Treasury secretary under Clinton)
Chair of Council of Economic Advisers: Christina Romer (UC Berkeley Economist, specialist in Great Depression)
Chairman of Economic Recovery Council: Paul Voelcker (Former Fed Chairman who hiked rates in 1980s to get us out of Stagflation)
Staff Chief of Economic Recovery Council: Austan Goolsbee (U of Chicago economist, Senior Economist at Progressive Policy Institute)
Commerce: Bill Richardson (Governor of New Mexico, was a presidential primary candidate)
Foreign Policy:
State: Hillary Clinton (Senator from NY, primary candidate)
Defense: Robert Gates (at least as a transition for 1-2 years)
Homeland Security: Janet Napolitano (Governor of Arizona)
National Security Adviser: General James L. Jones (Retired Feb 2007 - former Supreme Allied Commander, Europe; Commander of the United States European Command; and Commandant of the Marine Corps)
Social Policy:
Health and Human Services: Tom Daschle (Former Senate Democrat Leader, published a book on Health Care recently, strong supporter of health care reform).
Director of Domestic Policy Council: Melody Barnes (Executive VP, Center for American Progress)
Director of Office of Management and Budget: Peter Orszag (Director of Congressional Budget Office; has focused particularly on health care)
Legal:
Attorney General: Eric Holder (Deputy AG under Clinton)
Economy:
Treasury: Timothy Geithner (Current President of the NY Fed, helped craft bailout plan)
Chief of White House National Economic Council: Larry Summers (Treasury secretary under Clinton)
Chair of Council of Economic Advisers: Christina Romer (UC Berkeley Economist, specialist in Great Depression)
Chairman of Economic Recovery Council: Paul Voelcker (Former Fed Chairman who hiked rates in 1980s to get us out of Stagflation)
Staff Chief of Economic Recovery Council: Austan Goolsbee (U of Chicago economist, Senior Economist at Progressive Policy Institute)
Commerce: Bill Richardson (Governor of New Mexico, was a presidential primary candidate)
Foreign Policy:
State: Hillary Clinton (Senator from NY, primary candidate)
Defense: Robert Gates (at least as a transition for 1-2 years)
Homeland Security: Janet Napolitano (Governor of Arizona)
National Security Adviser: General James L. Jones (Retired Feb 2007 - former Supreme Allied Commander, Europe; Commander of the United States European Command; and Commandant of the Marine Corps)
Social Policy:
Health and Human Services: Tom Daschle (Former Senate Democrat Leader, published a book on Health Care recently, strong supporter of health care reform).
Director of Domestic Policy Council: Melody Barnes (Executive VP, Center for American Progress)
Director of Office of Management and Budget: Peter Orszag (Director of Congressional Budget Office; has focused particularly on health care)
Legal:
Attorney General: Eric Holder (Deputy AG under Clinton)
Thursday, November 20, 2008
Cabinet so far
Cabinet announcements so far....
Attorney General: Eric Holder (Deputy AG under Clinton and career prosecutor, wants to restore independence to AG office)
Health and Human Services: Tom Daschle (Former Senate Democrat Leader, published a book on Health Care recently, strong supporter of health care reform).
Homeland Security: Janet Napolitano (Governor of Arizona, tough on illegal immigration)
Edit: National Security Adviser: Unconfirmed talk that it could be General James L. Jones (Retired Feb 2007 - former Supreme Allied Commander, Europe; Commander of the United States European Command; and Commandant of the Marine Corps)
Edit: Secretary of State: Hillary Clinton has apparently made up her mind to accept the post, and vetting is finished and OK (see Bloomberg article). Sources say she is set to be nominated after Thanksgiving.
Attorney General: Eric Holder (Deputy AG under Clinton and career prosecutor, wants to restore independence to AG office)
Health and Human Services: Tom Daschle (Former Senate Democrat Leader, published a book on Health Care recently, strong supporter of health care reform).
Homeland Security: Janet Napolitano (Governor of Arizona, tough on illegal immigration)
Edit: National Security Adviser: Unconfirmed talk that it could be General James L. Jones (Retired Feb 2007 - former Supreme Allied Commander, Europe; Commander of the United States European Command; and Commandant of the Marine Corps)
Edit: Secretary of State: Hillary Clinton has apparently made up her mind to accept the post, and vetting is finished and OK (see Bloomberg article). Sources say she is set to be nominated after Thanksgiving.
Saturday, November 8, 2008
Dear President-Elect Obama...
Dear President-elect Obama:
You've been elected, and with a broad mandate, but the devil is in the details. How will you deliver?
You ran on a platform advocating change and unity, bringing accountability to government, and rejuvenating a suffering middle and lower class. However, most of the concrete policies you specified in your campaign are rather moderate, aimed at targeted small interventions, and seem to lack a cohesive vision. In one sense, this is good, because it grants you flexibility to respond to changing circumstances. In another sense, however, it is worrying - particularly given the broad array of challenges facing you.
Perhaps the most important point is this: do not let the size of recent financial bailouts or the government deficit distract you from deeper goals. Please remember the wisdom of Sir John Maynard Keynes, the great British economist: target a deficit in times of trouble towards sustained employment and economic renewal, so that you can increase revenues and balance the budget in times of economic health. In crafting your economic stimulus package, you would do well to remember your commitment to the middle and lower class, to the most vulnerable in society. Furthermore, you should try to aim at finding positive synergies that allow you to harness the crisis stimulus for longer-term goals. This is particularly relevant in terms of environmental, social welfare, and infrastructural objectives.
To illustrate, consider the following example. Lagging infrastructure in the United States is most apparent in two areas: energy and transportation, particularly rail transport. At the same time, we are embroiled in two wars abroad, at least one of which (Iraq) is significantly tied to oil. These two categories of infrastructure represent an enormous opportunity to achieve multiple objectives and follow through on the message of change and pro-lower class growth that propelled you to the White House.
Investing in the construction of rail transport - particularly high speed passenger rail - would provide hundreds of thousands of jobs to an industry deeply hurt by the burst of the present asset bubble, while reducing our long-term dependence on foreign oil, reducing harmful greenhouse gas emissions, and reducing America's long-term dependence on wasteful automobile, jet, and truck transport. Along similar lines, the provision of federal subsidies to local and state governments promoting mass transit systems, would have a similar impact. Such measures might run into some opposition (particularly from oil and auto industries), but that type of opposition could easily be cast as relying on corporate self-interest rather than the public good.
A very similar case can be made for clean energy subsidies and construction, particularly smaller scale technologies with less potential harm which can be utilized in local settings, maximizing the safety and security of our energy infrastructure while minimizing the long-distance transport of oil and coal. Wind (particularly in the Midwest and Appalacians) and Solar (particularly in the southwest) both provide excellent alternatives, and should be supplemented with other locally applicable solutions - such as tidal power and geothermal. Other initiatives, such as clean coal and nuclear should be explored, but have a larger number of detrimental side effects - coal mining and radioactive waste both cause ecological issues if mismanaged. Once again, these initiatives provide jobs and have the potential to reduce american utility bills, to the benefit of the middle class. They may be opposed by the coal and oil lobbies, but these lobbies again have selfish corporate profits as their interest, not the public good or the long-term health of our economy.
Lastly, please remember your commitments to social welfare, health care, and education. Please remember that all commitments should be funded with a progressive tax structure aimed at minimizing inequality (while maintaining incentives to entrepreneurs) and minimizing speculation. Measures like a small tax on financial transactions, or a Tobin tax on currency transactions, have minimal impact on long-term investment and savings (or normal business operations), but a substantial impact on "casino capitalism." Furthermore, these progressive tax measures could be earmarked to pay for health care and unemployment insurance, both of which would achieve substantial demand-side fiscal stimulus in their own right.
Mr. President-Elect, you have set yourself lofty goals. However, you have also signaled a willingness to play political hardball. You have a Vice President who is a major figure in the Senate and wields enormous respect. You have a Chief of Staff who is a similarly high-ranking member of the House of Representatives, and is a close political ally. You have built a mass movement that can be mobilized to provide support for your initiatives, and have tremendous personal charisma to rally the people. Coupled with an appropriate political strategy that begins with decisive and successful immediate action - through a stimulus plan that captures the synergies between many of your goals - you could achieve long-lasting and visionary success for this country.
In short, Mr. President-Elect, you have tremendous potential. Please do not waste it.
You've been elected, and with a broad mandate, but the devil is in the details. How will you deliver?
You ran on a platform advocating change and unity, bringing accountability to government, and rejuvenating a suffering middle and lower class. However, most of the concrete policies you specified in your campaign are rather moderate, aimed at targeted small interventions, and seem to lack a cohesive vision. In one sense, this is good, because it grants you flexibility to respond to changing circumstances. In another sense, however, it is worrying - particularly given the broad array of challenges facing you.
Perhaps the most important point is this: do not let the size of recent financial bailouts or the government deficit distract you from deeper goals. Please remember the wisdom of Sir John Maynard Keynes, the great British economist: target a deficit in times of trouble towards sustained employment and economic renewal, so that you can increase revenues and balance the budget in times of economic health. In crafting your economic stimulus package, you would do well to remember your commitment to the middle and lower class, to the most vulnerable in society. Furthermore, you should try to aim at finding positive synergies that allow you to harness the crisis stimulus for longer-term goals. This is particularly relevant in terms of environmental, social welfare, and infrastructural objectives.
To illustrate, consider the following example. Lagging infrastructure in the United States is most apparent in two areas: energy and transportation, particularly rail transport. At the same time, we are embroiled in two wars abroad, at least one of which (Iraq) is significantly tied to oil. These two categories of infrastructure represent an enormous opportunity to achieve multiple objectives and follow through on the message of change and pro-lower class growth that propelled you to the White House.
Investing in the construction of rail transport - particularly high speed passenger rail - would provide hundreds of thousands of jobs to an industry deeply hurt by the burst of the present asset bubble, while reducing our long-term dependence on foreign oil, reducing harmful greenhouse gas emissions, and reducing America's long-term dependence on wasteful automobile, jet, and truck transport. Along similar lines, the provision of federal subsidies to local and state governments promoting mass transit systems, would have a similar impact. Such measures might run into some opposition (particularly from oil and auto industries), but that type of opposition could easily be cast as relying on corporate self-interest rather than the public good.
A very similar case can be made for clean energy subsidies and construction, particularly smaller scale technologies with less potential harm which can be utilized in local settings, maximizing the safety and security of our energy infrastructure while minimizing the long-distance transport of oil and coal. Wind (particularly in the Midwest and Appalacians) and Solar (particularly in the southwest) both provide excellent alternatives, and should be supplemented with other locally applicable solutions - such as tidal power and geothermal. Other initiatives, such as clean coal and nuclear should be explored, but have a larger number of detrimental side effects - coal mining and radioactive waste both cause ecological issues if mismanaged. Once again, these initiatives provide jobs and have the potential to reduce american utility bills, to the benefit of the middle class. They may be opposed by the coal and oil lobbies, but these lobbies again have selfish corporate profits as their interest, not the public good or the long-term health of our economy.
Lastly, please remember your commitments to social welfare, health care, and education. Please remember that all commitments should be funded with a progressive tax structure aimed at minimizing inequality (while maintaining incentives to entrepreneurs) and minimizing speculation. Measures like a small tax on financial transactions, or a Tobin tax on currency transactions, have minimal impact on long-term investment and savings (or normal business operations), but a substantial impact on "casino capitalism." Furthermore, these progressive tax measures could be earmarked to pay for health care and unemployment insurance, both of which would achieve substantial demand-side fiscal stimulus in their own right.
Mr. President-Elect, you have set yourself lofty goals. However, you have also signaled a willingness to play political hardball. You have a Vice President who is a major figure in the Senate and wields enormous respect. You have a Chief of Staff who is a similarly high-ranking member of the House of Representatives, and is a close political ally. You have built a mass movement that can be mobilized to provide support for your initiatives, and have tremendous personal charisma to rally the people. Coupled with an appropriate political strategy that begins with decisive and successful immediate action - through a stimulus plan that captures the synergies between many of your goals - you could achieve long-lasting and visionary success for this country.
In short, Mr. President-Elect, you have tremendous potential. Please do not waste it.
Financial Crisis: Revisited
Hey folks, since I finally finished my series on the financial crisis, and since we now have a new administration - I thought I would re-post the links.
Financial Crisis Part I: The Antebellum - details the fairly immediate domestic historical causes of deregulation and the housing bubble. There is more that could be said here about the impact of international globalization, portfolio account liberalization, parallels with the East Asian crisis of 1997, and if the IMF has a role - but for now I'll leave those issues alone.
Financial Crisis Part II: The Conflagration - details the majority of the major banking collapses (I wrote this before Washington Mutual collapsed and merged with JP Morgan Chase). It also gives a sketch of the bailout and impact on national debt, trying to keep things in perspective. I think, in retrospect, that my critique was a bit conservative in this section, and the move towards actual equity shares in the banks is a good one, because it confers additional and more sustained oversight. One thing to keep in mind: the social role of the financial sector is not to make profits, it is to provide stability, transparency, and liquidity to producers and consumers alike - so that the economy continues to function. It needs to do this efficiently, but we need to remember that financial profits do not generally reflect actual productivity increases or the health of the real economy. In fact, when fueled by speculative investment, they typically prop up bubbles like the one we just saw. If there is any segment of the economy that should be stringently regulated, even to the point of quasi-nationalization, it is the banking sector (I do make this point in part III).
Financial Crisis Part III: A New Regulatory Framework - details my take, based partly on analysis from Dean Baker at CEPR (who, incidentally, is one of the few economists who has legitimately predicted all of this for years), on how we can input smart and targeted regulation to prevent the excesses of speculative activity, provide public oversight, and root the calculus of financial companies in long-term sustainable profits - rather than short-term bubble-burst activity.
So - for those who missed it the first time, or who are new readers, or only read part of it - there is my take on what we should do (roughly).
To come later - I will probably try and provide a framework for the Obama administration - how we should be focusing on changing or restructuring our society to be more dynamic, sustainable, and capable of providing legitimately equal opportunity for all.
Financial Crisis Part I: The Antebellum - details the fairly immediate domestic historical causes of deregulation and the housing bubble. There is more that could be said here about the impact of international globalization, portfolio account liberalization, parallels with the East Asian crisis of 1997, and if the IMF has a role - but for now I'll leave those issues alone.
Financial Crisis Part II: The Conflagration - details the majority of the major banking collapses (I wrote this before Washington Mutual collapsed and merged with JP Morgan Chase). It also gives a sketch of the bailout and impact on national debt, trying to keep things in perspective. I think, in retrospect, that my critique was a bit conservative in this section, and the move towards actual equity shares in the banks is a good one, because it confers additional and more sustained oversight. One thing to keep in mind: the social role of the financial sector is not to make profits, it is to provide stability, transparency, and liquidity to producers and consumers alike - so that the economy continues to function. It needs to do this efficiently, but we need to remember that financial profits do not generally reflect actual productivity increases or the health of the real economy. In fact, when fueled by speculative investment, they typically prop up bubbles like the one we just saw. If there is any segment of the economy that should be stringently regulated, even to the point of quasi-nationalization, it is the banking sector (I do make this point in part III).
Financial Crisis Part III: A New Regulatory Framework - details my take, based partly on analysis from Dean Baker at CEPR (who, incidentally, is one of the few economists who has legitimately predicted all of this for years), on how we can input smart and targeted regulation to prevent the excesses of speculative activity, provide public oversight, and root the calculus of financial companies in long-term sustainable profits - rather than short-term bubble-burst activity.
So - for those who missed it the first time, or who are new readers, or only read part of it - there is my take on what we should do (roughly).
To come later - I will probably try and provide a framework for the Obama administration - how we should be focusing on changing or restructuring our society to be more dynamic, sustainable, and capable of providing legitimately equal opportunity for all.
Friday, November 7, 2008
Cabinet scuttlebutt
Here are a few more articles on potential cabinet members: CBS discusses most open posts, specifically on foreign policy
we have this article from the Hindustan Times, and Reuters reports that former Clinton Secretary of Treasury Robert Rubin has ruled out a return to the post.
I'm going to mention a few of my preferences here, though I won't guess on many, because a lot of this is behind-the-scenes chatter and hard to predict:
(1) Treasury - NOT Rubin or Larry Summers - this whole financial crisis run-up started under the Clinton administration, so returning to the people who were wrong is a bad idea. Also, Summers has a big mouth and a large ego, and got into trouble at both the World Bank and Harvard for them. Paul Voelcker, former Fed chairman, is a possibility, but he is too much of an anti-inflation-hawk for my tastes and bears the stigma of the 1980s debt crisis. He's also getting old. Tim Geithner, current chair of the NY Fed, is a solid possibility because he was involved in crafting the bailout and can hit the ground running. Warren Buffet is seen as an outside shot - I might like that idea because Buffet is big on business fundamentals and stability, and agaisnt the over-financialization of our economy that has happened in the past few years. He's not a banker, which some take as a minus, but I see as a solid plus - the Wall Street-Treasury complex needs to take some time off.
(2) State - Bill Richardson is my pick, and almost a prediction. I think he's been angling for the role since the primaries. Plus, with a resurgent Latin America starting to have a voice in international affairs, a Hispanic secretary of state can go a long ways in casting a friendlier face. Richardson campaigned hard amongst latinos and broke with the Clintons to endorse Obama, so Obama also owes him a favor. He's also an old hand as Ambassador to the UN and has negotiated with Kim Jong-Il. It is worth noting that whoever is in charge of State will probably butt heads with Joe Biden.
(3) Defense - Personal choices are to stay with Robert Gates or to bring Colin Powell back into the fold. Gates is one of the best/most moderate people in the Bush administration and has openly stated that Defense needs to yield to state; that the US needs to focus less on hard power and overextending resources and more on soft power as other countries become global players. Plus, he can hit the ground running. Colin Powell is one of the most respected people in the US, including internationally, and his credentials are peerless: Chairman of the Joint Chiefs and Secretary of State under both Democrat and Republican administrations. He also underastands that military intervention is a last resort, and is not afraid to speak his mind - but does so in a calm, balanced, quiet, and respectful manner. Whoever is in DoD needs to be able to bridge the aisle and bring consensus on an orderly withdrawal from Iraq.
(4) Energy - I like the gubernator for this one - Arnold Schwarzenegger is another moderate Republican, who has done a lot as governor of California. He's promoted alternative energy, and has also been a proponant of improving US rail infrastructure. One project approved on election day was the first leg of funding for a bullet train in CA connecting Sacramento to LA. High Speed rail should be our #1 priority for infrastructure - it provides jobs, reduces oil consumption, reduces carbon footprint, and can streamline air travel so that we don't need to fly within a 800-1000 mile radius. Another potential place for Arnold, following this, is Dept of Transportation. See this link for the rail project.
(5) Council of Economic Advisors - A few people who should be included and listened to: (a) Amartya Sen (Nobel Prize 1998 on Famines, at Harvard, also on the IMF Governance Reform panel), (b) Joeseph Stiglitz (Nobel Prize twice, at Columbia, known for alternatives to globalization, and understands Latin American cooperative movements), (c) Dani Rodrik (arguable the best development economist for understanding how institutions impact the economy, also at Harvard) - along the lines of Rodrik, other possibilities include Nancy Birdsall at the Carnegie Endowment or Arvind Subramanian at the Peterson Institute, (d) Paul Krugman (Nobel Prize for work on trade this year, might be a bit vitriolic at times, but also understands the need for careful governance of globalization), (e) Maybe Jeffery Sachs at Columbia or William Easterly at NYU - both are known and respected internationally, but they also hate each other, so they might be better as people to consult on a part-time basis.
One last comment is this - to bring real change, Obama needs to start listening closely to the alter-globalization movement, best represented by the International Forum on Globalization (IFG). Some of those organizations are listed on my sidebar.
we have this article from the Hindustan Times, and Reuters reports that former Clinton Secretary of Treasury Robert Rubin has ruled out a return to the post.
I'm going to mention a few of my preferences here, though I won't guess on many, because a lot of this is behind-the-scenes chatter and hard to predict:
(1) Treasury - NOT Rubin or Larry Summers - this whole financial crisis run-up started under the Clinton administration, so returning to the people who were wrong is a bad idea. Also, Summers has a big mouth and a large ego, and got into trouble at both the World Bank and Harvard for them. Paul Voelcker, former Fed chairman, is a possibility, but he is too much of an anti-inflation-hawk for my tastes and bears the stigma of the 1980s debt crisis. He's also getting old. Tim Geithner, current chair of the NY Fed, is a solid possibility because he was involved in crafting the bailout and can hit the ground running. Warren Buffet is seen as an outside shot - I might like that idea because Buffet is big on business fundamentals and stability, and agaisnt the over-financialization of our economy that has happened in the past few years. He's not a banker, which some take as a minus, but I see as a solid plus - the Wall Street-Treasury complex needs to take some time off.
(2) State - Bill Richardson is my pick, and almost a prediction. I think he's been angling for the role since the primaries. Plus, with a resurgent Latin America starting to have a voice in international affairs, a Hispanic secretary of state can go a long ways in casting a friendlier face. Richardson campaigned hard amongst latinos and broke with the Clintons to endorse Obama, so Obama also owes him a favor. He's also an old hand as Ambassador to the UN and has negotiated with Kim Jong-Il. It is worth noting that whoever is in charge of State will probably butt heads with Joe Biden.
(3) Defense - Personal choices are to stay with Robert Gates or to bring Colin Powell back into the fold. Gates is one of the best/most moderate people in the Bush administration and has openly stated that Defense needs to yield to state; that the US needs to focus less on hard power and overextending resources and more on soft power as other countries become global players. Plus, he can hit the ground running. Colin Powell is one of the most respected people in the US, including internationally, and his credentials are peerless: Chairman of the Joint Chiefs and Secretary of State under both Democrat and Republican administrations. He also underastands that military intervention is a last resort, and is not afraid to speak his mind - but does so in a calm, balanced, quiet, and respectful manner. Whoever is in DoD needs to be able to bridge the aisle and bring consensus on an orderly withdrawal from Iraq.
(4) Energy - I like the gubernator for this one - Arnold Schwarzenegger is another moderate Republican, who has done a lot as governor of California. He's promoted alternative energy, and has also been a proponant of improving US rail infrastructure. One project approved on election day was the first leg of funding for a bullet train in CA connecting Sacramento to LA. High Speed rail should be our #1 priority for infrastructure - it provides jobs, reduces oil consumption, reduces carbon footprint, and can streamline air travel so that we don't need to fly within a 800-1000 mile radius. Another potential place for Arnold, following this, is Dept of Transportation. See this link for the rail project.
(5) Council of Economic Advisors - A few people who should be included and listened to: (a) Amartya Sen (Nobel Prize 1998 on Famines, at Harvard, also on the IMF Governance Reform panel), (b) Joeseph Stiglitz (Nobel Prize twice, at Columbia, known for alternatives to globalization, and understands Latin American cooperative movements), (c) Dani Rodrik (arguable the best development economist for understanding how institutions impact the economy, also at Harvard) - along the lines of Rodrik, other possibilities include Nancy Birdsall at the Carnegie Endowment or Arvind Subramanian at the Peterson Institute, (d) Paul Krugman (Nobel Prize for work on trade this year, might be a bit vitriolic at times, but also understands the need for careful governance of globalization), (e) Maybe Jeffery Sachs at Columbia or William Easterly at NYU - both are known and respected internationally, but they also hate each other, so they might be better as people to consult on a part-time basis.
One last comment is this - to bring real change, Obama needs to start listening closely to the alter-globalization movement, best represented by the International Forum on Globalization (IFG). Some of those organizations are listed on my sidebar.
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