In November 2005, the Prospect published an ingenious and influential piece by Sam Rosenfeld and Matt Yglesias titled "The Incompetence Dodge." The article took lethal aim at liberal hawks who had argued that the Iraq War was the right idea; it had just been executed incompetently. Rosenfeld and Yglesias demolished that conceit, demonstrating that the whole enterprise was flawed, in premise as well as execution.
Some progressives who find themselves disappointed by Barack Obama's senior economic appointments are consoling themselves with what might be termed "the competence dodge." The orthodox moderates named to top economic positions, the argument goes, were admittedly part of former Clinton Treasury Secretary Robert Rubin's team whose deregulatory policies helped spawn today's crisis. But at least they are highly competent.
Some even see these appointments as a reflection of Obama's political genius. When Tim Geithner's appointment as treasury secretary was leaked, the Dow gained almost 500 points. Using centrist nominees as cover for a fairly radical economic program could be Obama's latest master stroke. If only.
A year ago, Obama had an economic-policy staff of one -- Austan Goolsbee of the University of Chicago. To the extent that the candidate himself had fully formed positions, they were in areas he knew well, such as foreign policy, criminal justice, and constitutional rights, not economics. Even so, Obama's best speeches -- the early ones that he wrote himself -- suggested the soul of a New Dealer.
But as Obama became the leading contender, he needed a real economic team. By spring 2008, Obama was in reassurance mode. His success depended on convincing skeptical swing voters that he was trustworthy and mainstream. It was no time for heterodoxy. He turned to safe, senior economic experts, parading them on national television. This self-reinforcing group of mostly Clinton alums also proved competent at campaign-infighting. They became not just provisional advisers but core economic appointees.
Former Federal Reserve Chairman Paul Volcker, now 81, will get a part-time role heading a commission to solicit ideas on economic recovery. He has far less of a power position than either Geithner or Larry Summers, who heads the National Economic Council. Volcker, no friend of trade unions or deficit spending, is at least a true regulatory hawk. What a moment for Democrats when the lefty is Paul Volcker!
The invisible hand of Robert Rubin, who insinuated himself yet again into the heart of a Democratic presidential campaign, is evident in the whole band of brothers. Rubin protégés include Summers, Geithner, Peter Orszag, and Jason Furman. In fairness, there are differences among these men, and even protégés become their own people. Orszag has done a superb job at the Congressional Budget Office debunking the supposed entitlement menace, one of Rubin's cherished causes. Geithner is more pro-regulation than his predecessor, Hank Paulson, though as the crisis worsens that may be faint praise. Summers is the most orthodox of the three. But any rivalry of this ideologically similar team will be about primacy, access, and power, not about notably divergent policy prescriptions. The same could be said of Obama's much exaggerated policy differences with his arch rival and now secretary of state, Hillary Clinton.
Here is where the competence dodge fails. Nobel laureate Joesph Stiglitz and Federal Deposit Insurance Corporation Chair Sheila Bair, to name just two, are also utterly competent, but they have more radical views on remedies than Obama's senior economic team. At this writing, Geithner is said to be trying to oust Bair. Alan Greenspan was technically competent, too, but entirely wrong on whether markets could regulate themselves. Summers professes markedly different views than those he held a decade ago, citing changed circumstances. Summers, then a deregulator, now wants tougher financial regulations. Once a budget-balance man, Summers now calls for big deficits.
But the devil is in the details. Is the stimulus package a one-shot or the beginning of a permanent increase in public investment? Will Geithner and Summers pursue a more competent version of the Paulson bailouts, or more fundamental interventions? Should they nationalize a bank or two rather than just throwing money at bankers? Should entire categories of exotic derivatives be prohibited? Should credit-rating agencies become public utilities? Should distressed mortgages be refinanced directly by the government? Recovery will hinge on getting all this right.
In his views on economic policy, as in his life journey, Barack Obama is still a work in progress. As president, he will need to be the boldest and most competent of the lot.
