Or a Volcker in a pear tree, if you prefer.
Quick, name the current head of Council of Economic Advisors. Or the head of the National Economic Council. Stumped?
The head of the CEA is Edward Lazear, a former economics professor at Chicago and Stanford GSB. The head of the NEC is Keith Hennessey (I had to look that one up), a former, um, tester for Symantec (a software company), research assistant at a think tank, staffer for a Senate committee, and staffer for Trent Lott, with a masters in public policy from the Kennedy School. (That’s according to Wikipedia.) They are being replaced by Christina Romer and Larry Summers, respectively, two of the most prominent and respected economists in the world.
And now, for an encore, Obama has named Paul Volcker, now the most respected chairman of the Federal Reserve in recent memory, the hawk who choked off high inflation in the early 1980s, as head of the new Economic Recovery Advisory Board.
Does having an all-star lineup of economists and public servants guarantee a sound economic strategy? No, of course not. After all, you should have only one economic strategy, and we know about kitchens and too many cooks. But Obama is clearly trying to project the impression that he is bringing overwhelming firepower to bear on the problem, in an effort to bolster confidence in the markets. He is also signaling that his administration will follow a centrist, or at most moderate Democratic line. (Volcker first joined Treasury under Nixon, and was appointed Chairman of the Fed by Carter and then re-appoitned by Reagan; Geithner is an independent.)
Remember those charges of socialism in the last weeks of the election? The few socialists out there are sure to be disappointed.
2 thoughts on “And a Volcker on Top”
The liberal Democrats out there who voted for Obama are likely to disappointed. He is very much a member of that elite political club, the U.S. Senate, and has accepted its insular conventional wisdom.
That’s fine by me, as far as economics goes. This is a very capitalistic country and it will remain that way, despite all the current interventions by the federal government. Clearly the country has prospered from such an outlook. (Though I think a universal, single payer health insurance system would be incredibly helpful for the country, and would clearly help many American corporations compete in the world.)
What troubles me is that Obama will likely continue the same foreign and military policies that this country has espoused over the last 60 years. Not only are those policies detrimental to the U.S. and the world, they rob precious resources and productivity from the American economy.
Volcker and Summers may pleasantly surprise a lot of Progressives.
Recently, Volcker has spoken out strongly against the excessive leverage and opacity plaguing capital markets and that precipitated the current market crisis. Reduce leverage in capital markets, increase market transparency, improve security disclosure and capital markets will begin to stabilize and trade efficiently. While Volcker hasn’t proposed a lot of new regulation in his position statements, the regulatory changes he has suggested do go to the heart of the crisis and should prevent future debacles. There are four basic principles of good market regulation: full and timely disclosure by issuers of securities, market transparency, limits on risk taking (margin limits and a skin-in-the-game requirement), legal protection of investor rights. Volcker is advocating stronger action on three of the four principles.
While Summers is light on regulation (a deficiency remedied by Volcker), Summers has spoken out publicly on the poor structural conditions in the US economy caused by years of underinvestment in physical infrastructure (roads, ports, broadband,…), human capital (education, accessible health care, …) and intellectual capital (R&D). Summers has connected the current need for a large fiscal stimulus with the need to make the US economy more competitive and structurally stronger. Summers has also made the connection between the poor balance sheet of the US middle class and the poor structural health of the US economy.
If Volcker and Summers act on their convictions, Progressives should in the end be pleased by their appointments.
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