The extent to which the Obama administration should push deficit spending is the subject of a debate bubbling within his economic team, according to people close to the group who requested anonymity. Although most appear to accept the Keynesian axiom that economic stimulus in a time of crisis requires deficit spending, the extent of the budget-busting is at issue. After all, more than $1 trillion in financial bailouts and economic stimulus already has been enacted this year and financed by government borrowing.
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Change, meet crisis
A frail economy and widening budget deficit may hinder Obama's ambitious spending agenda.
ELECTION 2008: THE FINANCIAL CRISIS
For The Record
Los Angeles Times Thursday, November 13, 2008 Home Edition Main News Part A Page 2 National Desk 3 inches; 105 words Type of Material: Correction
Presidents and the economy: An article in Section A on Nov. 6 about the financial crisis included a chart showing U.S. financial performance under various presidents. A column labeled "U.S. deficit or surplus" should instead have been labeled "increase or decrease in deficit." Here are the amounts by which the deficit went up or down during the terms of these presidents: Kennedy, up $1.4 billion; Johnson, up $20.4 billion; Nixon, down $19 billion; Ford, up $67.6 billion; Carter, up $0.1 billion; Reagan, up $81.4 billion; George H. W. Bush, up $135.2 billion; Clinton, down $527.3 billion; George W. Bush, to the present, up $691.7 billion.
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At the more cautious end of the spectrum, these people say, are former Treasury Secretaries Rubin and Lawrence H. Summers. The latter is thought to be a leading candidate to return to that post.
The campaign, however, seemed to be attempting to quash talk of a split on the economic team when Rubin and Bernstein, who eagerly backs a stimulus plan, published a joint op-ed piece Monday in the New York Times in which they took note of their policy differences.
Rubin acknowledged viewing long-term deficits "as a serious threat . . . to our economic future," while Bernstein minimized the relationship Rubin cited between the deficit and higher interest rates.
They also acknowledged disagreement on trade policy, specifically on whether trade agreements should include provisions protecting foreign workers as a way to preserve U.S. workplace standards, which Bernstein supports.
But they expressed agreement on most fundamental issues, including the need for public investment in education, healthcare and job training, as well as restoring the income tax rates of the Clinton years.
Another contentious issue, the scale of new regulations on the financial markets, was treated gingerly. The aggressive oversight favored by Bernstein is opposed by Rubin, who made his career on Wall Street before joining government.
"Significant reforms are needed," they agreed, but those should be balanced between consumer protection and mitigating systemic risk on one side, and "preserving the benefits of a market-based system on the other."
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Ralph Vartabedian contributed to this report.
michael.hiltzik@latimes.com
