Monday, February 9, 2009

Joe Biden vs. Larry Summers

Christopher Hayes analyses Obama's economic team and projects Joe Biden as the true counter-weight to Larry Summers and his neo-liberal cohorts:

The main players in Barack Obama's economic team can be cleaved roughly into two groups: (1) center-right neoliberals like Larry Summers, head of the National Economic Council; his deputy, Diana Farrell; and Treasury Secretary Tim Geithner; and (2) progressive labor-liberals like Melody Barnes, director of the Domestic Policy Council; Biden's chief economic adviser, Jared Bernstein; and labor secretary nominee Hilda Solis.

In the Clinton administration ├╝ber-neoliberal Robert Rubin famously won against labor-liberal Robert Reich, pushing privatization, deregulation and balanced budgets over a more robust welfare state. But in the intervening years wage stagnation, rising inequality and this financial crisis have pushed the neoliberals in a more progressive direction. It's hard to imagine the Larry Summers of 1993 saying that income inequality is the "defining issue of our time," as he recently did, or, for that matter, advocating a stimulus package that may run as high as $900 billion.

The problem is that Summers and Geithner seem to have retained their dispositional trust in the market and skepticism of public sector involvement. So instead of nationalizing banks, as many economists urge, they're reportedly busy crafting a plan for TARP II similar to former Treasury Secretary Henry Paulson's ill-fated attempt to purchase bad assets from the banks. According to The New Republic's Noam Scheiber, whenever someone proposes a policy that crosses Summers's delicate threshold for Big Government, he derides it as "Putinesque." Unfortunately, reviving the financial sector may require measures that would make even Putin blush.

On top of that, Summers has already come to dominate the White House economic policy shop. One person close to Obama's economic team told me that on economic policy, "it's looking like it's Larry's show." This leaves a disconcerting vacuum in the White House for a labor-liberal voice equal in stature and clout. Enter, perhaps, Joe Biden.

In December he named Bernstein, formerly of the labor-friendly, stoutly progressive Economic Policy Institute, to be his chief economic adviser, a position with no recent precedent. Bernstein then co-wrote the first economic report released by the transition team, which attempted to quantify the benefits of the president's proposed stimulus. He is one of the people present for the daily economic briefings to the president.

Biden is "really pushing hard" on "a more progressive populist approach to economic policy," says Mike Lux, the transition's liaison to the progressive movement. "I'm just delighted that there's somebody with his clout that's doing this, otherwise our side would be in a lot worse shape."

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