Obama rounds up the usual suspects

Obama met yesterday morning with his "banking brain trust" to come up with a response to the ongoing financial meltdown. Politico has their names here. In the room were the most senior members of the Clinton Administration economic team, plus Paul Volker. A few others participated by telephone. On the list, I see exactly one person, Joseph Stiglitz, who might be expected to question the conventional economic wisdom that has guided both parties for 2 decades.

Nobody from left-leaning think tanks like Center for Economic and Policy Research, Economic Policy Institute, or Demos. No Robert Reich (even though he has been speaking as Obama's surrogate on economics), who has a different plan, or other labor-oriented economist. No George Soros (who probably knows more about the financial markets than all of those who did participate). In fact, nobody who would be uncomfortable at the University of Chicago.

If Obama becomes President, he'll be facing the most challenging economy in nearly 80 years, and it looks like he'll be relying on the most in-a-rut, helped-to-get-us-here group of advisors it is possible to imagine. Experience means you know how to do what you've done, but if what needs doing next is different, experience is likely disabling.

Update on Sunday, July 19, 2009 at 09:14AM by Skeptic

Paul Krugman seems to agree here.

Update on Friday, December 11, 2009 at 10:43AM by Skeptic

One year on, Matt Taibbi writes a lengthy, scathing, and fair indictment of Obama for selling out to Wall Street and excluding economic advisors who dissent from basic Rubinomics. 

The significance of all of these appointments isn't that the Wall Street types are now in a position to provide direct favors to their former employers. It's that, with one or two exceptions, they collectively offer a microcosm of what the Democratic Party has come to stand for in the 21st century. Virtually all of the Rubinites brought in to manage the economy under Obama share the same fundamental political philosophy carefully articulated for years by the Hamilton Project: Expand the safety net to protect the poor, but let Wall Street do whatever it wants. "Bob Rubin, these guys, they're classic limousine liberals," says David Sirota, a former Democratic strategist. "These are basically people who have made shitloads of money in the speculative economy, but they want to call themselves good Democrats because they're willing to give a little more to the poor. That's the model for this Democratic Party: Let the rich do their thing, but give a fraction more to everyone else."

See Rubinomics in Crisis for an explanation of the Democratic Party's internal wrangle about economic philosophy.  It seems the Rubinistas may never have doubted their doctrine; they were just concerned they might not get back into power to keep implementing it.  Now that they're back in power in the Obama White House, the crisis is over and the doctrine is unchanged.

Thanks to Christine for the link.

Comments

[Ken Houghton]

Did you miss Gene Sperling on the list? (Even ignoring Summers, who wouldn't work at Chicago, but fits the rest of the description.)

Most interesting name on the list,though, was Paul O'Neill, whose reputation appears to be being rehabilitated through his expressions of guilt more than his actions.

[Skeptic]

Ken (Angry Bear?),

I really don't know much about Sperling except that he was a Bill Clinton economic advisor from the 1992 campaign to 2001. In the absence of other information I assume he was DLC and comfortable with Clinton economic policies.

Others, including Rubin and Summers, seem to be testing the mea culpa cure. But, in the end, when confronted with a new problem, people tend to fall back on what they "know." (See the Josh Billings quote in the title to this blog.) That could be a problem I wish we didn't have.

Thanks for commenting.

[PR]

I wonder if Stiglitz offered any insight on the claim, in his 2002 'Fannie Mae Papers' article with Orszag and Orszag, that: "Given this, the expected monetary costs of exposure to GSE insolvency are relatively small - even given very large levels of outstanding GSE debt and even assuming that the government would bear the cost of all GSE debt in the case of insolvency. For example, if the probability of the stress test conditions occurring is less than one in 500,000, and if the GSEs hold sufficient capital to withstand the stress test, the implication is that the expected cost to the government of providing an explicit government guarantee on $1 trillion in GSE debt is less than $2 million. To be sure, it is difficult to analyze extremely low-probability events, such as the one embodied in the stress test. Even if the analysis is off by an order of magnitude, however, the expected cost to the government is still very modest." Ex-post it looks like his analysis was off by 5 orders of magnitude.

[Skeptic]

PR,

Interesting. I'm gonna guess he didn't bring it up.

Thanks for the quotation.