Conservatives are understandably depressed these days, but they now have something to smile about in President-elect Obama’s picks for key economic posts, such as Tim Geithner for Secretary of the Treasury.
Mr. Geithner, currently president of the New York Federal Reserve, boasts an intimate knowledge of international economics. During his previous stint at the Treasury under Larry Summers and Robert Rubin, he was instrumental in the successful response to a variety of international crises, including the Mexican peso devaluation and the Asian financial crisis.
He has also been involved with the response to the current financial crisis. In other words, he’s up to speed on the issues and challenges facing the capital markets. Perhaps the most telling sign is how Wall Street has reacted to the announcement. Moments after reports of the Geithner pick surfaced, the Dow Jones Industrial Average shot up more than 300 points. There are still questions about Mr. Geithner’s views on taxes, regulation, and the role of government overall. His performance at Treasury and the New York Fed, however, is encouraging.
Larry Summers, former Treasury Secretary, will play a key role in coordinating policy as the head of the National Economic Council. Like Geithner, Summers was also a protégé of former Treasury Secretary Rubin. Summers brings a long track record as an academic economist as well as experience in government. Hopefully, his academic work will complement Geithner’s long insider experience.
Perhaps the most interesting of the economic appointments was UC Berkeley professor Christina Romer as the Chair of the President’ s Council of Economic Advisers (CEA). Romer is an accomplished and well recognized academic economist with vast knowledge of both fiscal and monetary economics. She has published widely on the monetary causes and cures of the Great Depression. She has also written on the negative effects of tax increases on economic output. Specifically she concluded that increases in taxation lead to lower economic output, chiefly because of negative effects on investment. Her combined knowledge of tax incentives and the Depression will be instrumental in formulating policy within the Obama economic team.
Finally, the appointment of Peter Orszag as the Director of the Office of Management and Budget indicates a push for balanced budgets over the medium term and a serious attempt at solving the problems of entitlements. Orszag has spent considerable time researching complex fiscal issues including taxation, social security, health care, and the budget while at the Congressional Budget Office and the Brookings Institution. While conservative economists would disagree with Orszag on a number of issues, they tend to agree on many of the big ones that matter most.
President-elect Obama may have been the most liberal senator in the Senate, but these selections reveal a sprint to the political center. That is not to discount serious policy risks such as increased taxes, changes to labor laws, and the introduction of new costly regulations. However, the more radical aspects of the agenda, such as trade protectionism, are clearly not priorities for the administration.
Geithner, Summers, Romer and Orszag may not be ideal from a limited government, supply-side, incentive- focused perspective. When one considers what candidate Obama campaigned on, however, they are much better than expected. If our new president continues this centrist trend, and he should, that will make for a happy holiday season, and beyond, for all Americans.
* This article also appeared in the following publications. Title of article may vary.
The Daily Messenger (Canandaigua, NY), December 17, 2008
News-Herald (Souderton, PA), December 17, 2008
Enfield Press (Enfield, CT), December 25, 2008
Rockbridge Weekly (Lexington, VA), December 31, 2008
The Tolucan Times and Canyon Crier (Toluca Lake, CA), January 7, 2009
Sacramento Union (Sacramento, CA), January 8, 2009