Tuesday, November 25, 2008

Feel better?

New York Times photo: Barack Obama on Monday with his economic advisers, from left, Timothy F. Geithner, Christina D. Romer, Lawrence H. Summers and Melody Barnes. Also on the stage is Joseph R. Biden Jr.

I do, well, a little bit anyway.

President-elect Obama has no magic powers to right the financial system or stop the recession, but he got off to a good start Monday by naming a top economic team that is smart, experienced, professional, and pretty much non-ideological.

Treasury Secretary-designate Tim Geithner is a career public official, a former Deputy Treasury Secretary, and currently President of the New York Fed, where he's been a key player in the urgent efforts to keep the financial system from falling apart. His designation ensures a smooth transition to the new Administration. And Obama will get good advice from Larry Summers and Christina Romer.

On Tuesday, Obama followed up with the expected nomination of Peter R. Orszag, another steady, experienced hand, to be his budget director.

Equally important, in the two announcement news conferences, Obama made a number of things about his intentions clear:

-- He and President Bush and their teams are communicating and coordinating on the emergency financial measures.

-- He wants a really big stimulus package and expects Congress to come up with one he can sign by the time he takes office.

-- He's for a bailout of Detroit's Big Three, with strings attached.

-- He will not seek to phase out the Bush tax cuts before they expire in 2011 (although he was uncharacteristically inarticulate in trying to fudge this turnabout).

-- He still plans to seek his promised "tax cut for the middle class."

-- He's tasked Orszag to plow through the next federal budget "line by line" to eliminate "programs that aren't working" and otherwise save money to offset some of the balooning federal deficit.

A week ago, uncertainty about the nation's leadership during a transitional power vacuum was adding new fear on top of what was already a panic. Obama was beginning to draw criticism for not making these announcements sooner and for appearing to prefer the sidelines, as Bush and Paulsen struggled with the evolving bailouts. He's clearly not on the sidelines, now.

It's especially encouraging that Obama is putting in place an essentially professional senior economic team, one that is being called "centrist" but might better be called "transpartisan." There is an obvious parallel between this group and his yet-to-be-formally-announced national security team, which likely will include his main Democratic rival and a heavy-weight lineup of experienced professionals.

I think Obama understands better than most Democrats that his victory, though decisive, should not be interpreted as some sort of sweeping "mandate." In today's budget news conference, he made a point of saying that his 53% of the vote meant that John McCain got 46 or 47% of the vote, and that he had to be responsive to everyone. He knows that a switch of a few percentage points would have given the Presidency to McCain, and that this might well have happened if the financial crisis had struck a couple of months later.

It's not just that Obama is preparing to govern from the center. He is trying to ensure the long-term support of more moderate Democrats, most of whom voted for Hillary Clinton, by bringing Mrs. Clinton into the tent (and not incidentally, by preventing any retribution against Joe Lieberman). He's also trying to build or firm up support among moderate Republicans and independents, some of whom voted for McCain or supported Obama only tepidly, by reaching out to McCain and others in the GOP. And it looks as if he's embracing a couple of McCain's key campaign points -- federal budget discipline and no tax increases going into a recession. I'll be posting more on this political aspect of Obama's moves in the near future.

Of course, Obama's appointments and his stated intentions will not stave off what may be a severe recession. We've enjoyed nearly uninterrupted growth, fueled by burgeoning credit, for 25 years, with only a couple of relatively minor and brief downturns. We now may be in for a tough, prolonged economic shakeout before growth resumes.

For the moment, though, we can feel a little better.

UPDATE -- But the economic news isn't good.

UPDATE II -- Larry Kudlow views Geithner, Summers and Romer as "pro-growth," market-oriented, anti-tax and pro-free trade. Hmmm....

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