Tuesday, November 25, 2008

Obama and his 'centrist' economic advisers

Obama's newly assembled economic team is described as "centrists" who have a history of emphasizing balanced budgets over federal stimulus spending.

Yes, they do have that history. But Rubinomics -- of which all the members of the team were dutiful adherents -- may end up consigned to the dustbin of history.

Larry Summers, who was Robert Rubin's protege at the U.S. Treasury in the Clinton administration, hasn't been talking like a centrist lately. From a story in today's the Wall Street Journal:

"There are a lot of different ways of saying it, but the way I heard it said best was by President Zedillo about six months into the Mexican financial crisis. He said: Markets overreact -- and that means policy has to overreact. You don't want to come up late -- and you don't want to come up short."

Today's financial crisis has turned even the Republican anti-regulatory stalwart Treasury Secretary Paulson into an on-the-fly Keynesian.

And looks who's elbowed its way to a special place at the federal bailout trough -- Citibank, whose top economic adviser during its calamitous embrace of securitized mortgages was Rubin.

Christina Romer, the new chair of Obama's Council of Economic Advisers, is a resolute monetarist who thinks fiscal stimuluses, unless they are tightly controlled, lead to inflation. But at his press conference Monday, Obama called for Congress to pass stimulus legislation that may cost as much as $700 billion and extend over two years. While Obama was urging passage of this legislation, standing alongside him -- to the left and right, but not in the center, were all the members of his economic team.

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