Obama assigns centrists to make radical economic moves
The team led by Lawrence Summers, Timothy Geithner and Christina Romer will have to strike a balance between extraordinary government intervention and the nation's commitment to free markets.
Reporting from Washington — The economic team that President-elect Barack Obama unveiled Monday, led by Lawrence Summers, Timothy Geithner and Christina Romer, comprises widely respected, centrist economists who until recently advocated cautious, sensible-shoe policies to do such things as boost savings, reduce deficits and allow markets maximum feasible rein.
But the assignment that Obama has given them is anything but cautious and sensible-shoe.
It is to make Washington the consumer of last resort in an economy in which consumption is plunging. It is to devise industrial-policy-like programs to salvage a collapsing auto industry and turn green an energy industry almost wholly focused on fossil fuels. It is to dip more deeply into the lives of ordinary Americans -- especially those with housing troubles -- than the government has done in generations.
But so much has gone so wrong during the last 15 months that what would have been beyond the political pale as recently as a few years ago is quickly becoming the consensus.
"These are not moderate, centrist times, so economists who in normal times are moderate and centrist aren't going to act that way now," said J. Bradford DeLong, a UC Berkeley economic historian and prolific economic blogger. "The wild-eyed radicals are looking pretty sensible."
Summers will be Obama's chief economic advisor, Romer will chair the White House Council of Economic Advisors, and Geithner is Obama's nominee for Treasury secretary.
Their underlying task is to reconcile the nation's historic commitment to free markets even as the government is intervening ever more deeply in the financial system, in individual companies and in people's lives.
"Larry and the rest have to re-strike the balance that FDR sought in the New Deal of harnessing the market's potential while at the same time damping its destructive social impulses," said Robert Z. Lawrence, a prominent Harvard economist.
That means the new administration must navigate uncharted and uncomfortable terrain. It must thread its way, for example, between calls for an expensive healthcare overhaul and pressure to boost the economy with more deficit spending. It must deal with union demands to rewrite labor laws while trying to coax businesses into expanding. And it must satisfy environmentalists who want "green" policies even at the cost of economic growth.
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