By Simon Johnson. Tim Geithner and Larry Summers are talking a good game on fiscal policy to the G20. But they are struggling with to establish traction for their “spend now, consolidate later” message. Fortunately, there is an easy and obvious opportunity to establish credibility on this issue: Bring Paul Krugman into government.
Earlier this week, Peter Orszag resigned from his cabinet position as director of the Office of Management and Budget. The Washington Post put out one of the first lists of candidates who could replacement him. Senator Byron Dorgan would be a smart pick and some of the Post’s other suggestions could make sense.
But surely the front runner is Jason Furman. The working assumption is that Treasury Secretary Tim Geithner and National Economic Council director Larry Summers are in positions of influence for the long haul – and they have a track record of preferring team players over people who could bring competing perspectives to the table.
The Hamilton Project, housed at the Brookings Institution, was designed as a government-in-waiting by Robert Rubin. Then-Senator Obama attended its inaugural public meeting, with Peter Orszag as head of the project. Appointing Furman, successor to Orszag at Hamilton and currently a deputy to Larry Summers at the NEC, or another person from the same wing of the Clinton administration would continue in this tradition.
This is unfortunate, because the brilliant choice would be Paul Krugman - completely taking the wind out of the Republicans’ sails on fiscal deficits. Krugman has scolded them, in real-time and to great effect, consistently with regard to ruining the budget. And he has an important point – the Bush administration inherited a fairly sound fiscal position from the Clinton administration but squandered it thoroughly over 8 years. Continue reading