It's already time to revisit the issue of President-elect Obama's team of advisors and new Cabinet members. Last week I wrote that I wasn't thrilled by the names so far but they seemed part of a plan to install git-r-done types, that if there was change it would be through new policies and not so much new people. That still seems to be the case, but now there is one connection that's more troubling.
Why is Obama taking so much economic advice from a man so tied to our current economic woes, particular now the possible pending collapse and/or bailout of the massive Citigroup. That advisor is former Clinton Treasury Secretary Robert Rubin, who has been playing a key role in the Obama transition effort and who has close ties with the two key members of the new president''s new team, expected Treasury Secretary-designate Tim Geithner and economic advisor Larry Summers.
Given Rubin's prominent role as Obama advisor and mentor to his team, this news of his role as a director of the troubled Citigroup is quite alarming:
"Chuck Prince going down to the corporate investment bank in late 2002 was the start of that process," a former Citigroup executive said of the bank's big C.D.O. push. "Chuck was totally new to the job. He didn't know a C.D.O. from a grocery list, so he looked for someone for advice and support. That person was Rubin. And Rubin had always been an advocate of being more aggressive in the capital markets arena. He would say, 'You have to take more risk if you want to earn more.'
Those CDOs -- collateralized debt obligations -- are what is dragging Citigroup into the muck, as well as relaxed banking regulations, some of which were pushed through by Rubin as Treasury Secretary. A lot of people are worried about the Obama-Rubin connection, and not just the usual suspects but liberal writers like Josh Marshall over at Talking Points Memo:
As you probably know, Rubin has become a key economics advisor to President-elect Obama and is advising the transition, though he seems neither in line for nor interested in a formal appointment. But Rubin's hand does seem present at so many turns in Citigroup's undoing that I see no way of getting around asking what sort of advice he's giving.
Same here, although at this point one wonders the sense of cutting Rubin loose, since his friends Geithner and Summers are already in the pipeline. It's too bad Obama didn't make his primary economic team people like Nobel laureate Paul Krugman (an occasional Obama critic, but so was Hillary Clinton) or former Labor Secretary Robert Reich.
But I will say this: Obama's economic advice, including his ill-advised use of Rubin (and here's another troubling example of Rubin's arrogance) has yet to result in dumb economic ideas. In fact, his plan for an economic stimulus plan focused on infrastructure and alternative energy, while not a surprise, is exactly where we need to be heading. Also agreeing is Robert Reich:
In short, Obama's job-stimulus plan will be a down-payment on his larger plan to increase the nation's public investment. "These aren't just steps to pull ourselves out of this immediate crisis," he says, "these are the long-term investments in our economic future that have been ignored for far too long. And they represent an early down payment on the type of reform my Administration will bring to Washington." He could not be more specific, at least while still President-Elect.
At a time when aggregate demand is shriveling because consumers aren't spending and investors have stopped investing, and exports are shrinking, Obama recognizes that government must be the spender of last resort. He will combine old-fashioned Kaynesian economics with newly-fashioned public investments to pull the economy out of its slump.
Bottom line, still: It's important to ask the "who" of the Obama transition, but what really matters to most of us is the "what."
UPDATE: Tomorrow's Times has a much more in-depth look at the Rubin connection.