It’s one month into Barack Obama’s presidency and it’s already clear that the economic team isn’t making the grade. Larry Summers helps craft a stimulus plan that almost no other economist thinks will work — at least as well as it should. Timothy Geithner announces his bank-rescue plan and the market immediately drops 300 points.
The solution? Appoint Paul Krugman economic czar.
Krugman, of course, is a Nobel Prize–winning economist from Princeton, who’s also a formidable columnist for the New York Times. He obviously knows Fed Chairman Ben Bernanke well from Princeton (Bernanke made Krugman the job offer that brought him to campus), so they’ll work well together. And he offers three huge advantages over anyone Obama has appointed so far:
1) HE KNOWS WHAT TO DO Admittedly, this is a subjective category — you have to buy into Krugman’s notions (which I do) that the stimulus package was vastly under-funded and untargeted; that we’re suffering from a solvency problem, not a liquidity problem with the banks; that some banks need to be nationalized, etc., etc.
But whether you agree with Krugman or not, at least his prescriptions are coherent and dramatic. The good news about Obama’s economic policies so far is that they’ve managed to fulfill his campaign promise of uniting both sides. The bad news is that they’ve done so largely by fusing left and right in opposition to what he’s done. Krugman’s appointment would eliminate half the opposition, and the Republicans are never going to support Obama anyway.
2) HE’S UNTAINTED In legal ethics, the standard is not whether an individual has done anything wrong, but whether he or she gives “the appearance of impropriety.” Applying that standard, Summers and Geithner don’t cut it because they’re too identified with the policies of the past, and with Bob Rubin.
During his tenure under Bill Clinton, Summers curtailed Commodity Future Trading Commissioner Brooksley Born’s attempts to regulate derivatives. His protégé Geithner, as president of the New York Federal Reserve Bank from mid-2003 on, was in a position to try to address this crisis years ago. But he didn’t see it coming, either.
Every time these men take an action that seems to help an old friend at a bank — and they seem to be doing it often — they raise questions about their impartiality. That’s unacceptable — and it’s a problem Krugman doesn’t have.
Besides, Summers’s and Geithner’s experience may be limiting them. This is a new kind of crisis that requires a new kind of thinking. To this point, to use the old cliché, Obama’s mainstream-to-a-fault economic team hasn’t been able to think outside the box.
3) HE’S A TERRIFIC COMMUNICATOR This may, in fact, be Krugman’s most important attribute. Whatever one thinks of Geithner, public speaking is not one of his strengths: one wag described his recent bank-bailout-plan announcement as akin to “an elf giving a book report.”
As for Summers, his communication problems have been well publicized. Suffice it to say that he’s been in office only a month and he’s already managed to alienate Obama appointee and former Fed chairman Paul Volcker.