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Obama’s Economic Strategy Begins to Emerge as Team Takes Shape

November 26, 2008 at 6:15 PM EDT
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In an attempt to combat the economic crisis, President-elect Barack Obama has appointed key members of his economic team, including former Fed Chair Paul Volcker, to lead an economic advisory panel. Two financial writers assess his team and financial recovery plans.

JUDY WOODRUFF: Now a look at how the president-elect is shaping his team and response to a major financial crisis and all but certain recession. NewsHour correspondent Kwame Holman begins with this report on today’s developments.

KWAME HOLMAN: Launching his third news conference in as many days focused on the economy, the president-elect again underscored it as his top priority, today announcing he was forming an Economic Recovery Advisory Board.

BARACK OBAMA, President-elect of the United States: At this defining moment in our nation’s history, the old ways of thinking and the old ways of acting just won’t do.

KWAME HOLMAN: Mr. Obama’s advisory board will be headed by former Federal Reserve Chair Paul Volcker. In that role, from 1979 to 1987, Volcker was credited with promoting policies that helped tame rampant inflation. He served with presidents from both parties. Mr. Obama touted that experience today.

BARACK OBAMA: Paul has served under both Republicans and Democrats and is held in the highest esteem for his sound and independent judgment.

KWAME HOLMAN: The board’s staff director and chief economist will be longtime Obama adviser Austan Goolsbee, currently a professor of economics at the University of Chicago.

Mr. Obama said the board would exist for only two years, unless he determined there was a need to extend it. He said its members would include people outside of government and would be charged with giving him independent recommendations on his economic recovery plans.

The president-elect said the board would provide a “fresh perspective” that’s needed on economic policy.

BARACK OBAMA: The reality is, is that sometimes policy-making in Washington can become a little bit too ingrown, a little bit too insular.

The walls of the echo chamber can sometimes keep out fresh voices and new ways of thinking. You start engaging in groupthink. And those who serve in Washington don’t always have a ground-level sense of which programs and policies are working for people and businesses and which aren’t.

KWAME HOLMAN: The new board would be in addition to two traditional bodies that advise presidents on financial matters: the Council of Economic Advisers and the National Economic Council.

On Monday, Mr. Obama named former Treasury Secretary Lawrence Summers to be the council’s director and tapped New York Federal Reserve Chair Timothy Geithner as treasury secretary. The men served together in the Clinton administration.

Answering questions today, the president-elect took on the charge that this week’s appointments do not represent the change he talked about during the campaign.

JOURNALIST: You were talking about changing Washington, your campaign was. Paul Volcker has been around a long time. He’s somebody whose knows the ways of Washington. But what do you say, you know, say to your supporters who are looking for change?

BARACK OBAMA:┬á Actually, Paul Volcker hasn’t been in Washington for quite some time. And that’s part of the reason he can provide a fresh perspective.

When it comes to the people that we’ve pulled together — because I know this has been sort of conventional wisdom floating around Washington, that, well, you know, there’s a recycling of people who were in the Clinton administration, although Paul dates before that.

The last Democratic administration that we had was the Clinton administration. And so it would be surprising if I selected a treasury secretary who had had no connection with the last Democratic administration, because that would mean that the person had no experience in Washington whatsoever.

And I suspect that you would be troubled and the American people would be troubled if I selected a treasury secretary or a chairman of the National Economic Council at one of the most critical economic times in our history who had no experience in government whatsoever.

What we are going to do is combine experience with fresh thinking.

But understand where the vision for change comes from, first and foremost. It comes from me. That’s my job.

KWAME HOLMAN: Mr. Obama also was asked if his three appearances this week indicate dissatisfaction with the way the Bush administration has dealt with the crisis.

JOURNALIST: When you say that there needs to be a new way of thinking and the old way of thinking won’t do anymore, does this suggest a bit of a frustration or disappointment with the way the Bush administration and Secretary Paulson is handling the crisis to this point?

BARACK OBAMA: No, I think what it speaks to is the frustration of eight years in which middle-class wages have gone down or, in real terms, their family incomes have been reduced.

It speaks to my frustration about all the families that I’ve met over the last two years who have lost their health insurance or their pensions are in danger, young people who can’t afford to go to college.

It expresses frustration about our inability to tackle some of the long-term problems that we’ve been facing and have been talking about for decades, whether it’s health care, energy, an education system that’s been slipping behind in critical areas like math or science, and most of all, I think, frustration with the incapacity of Washington to take bold, clear, decisive steps to deal with our economic problems.

KWAME HOLMAN: The president-elect also sought to ease concerns of Americans as they head into the traditionally busy Thanksgiving shopping weekend, saying, “Help is on the way.”

Obama team 'ramping up'

JUDY WOODRUFF: Jeffrey Brown has more on the Obama economic team.

JEFFREY BROWN: And I'm joined by two people who've been watching and covering developments closely. Eamon Javers writes about the intersection of Wall Street and Washington for Politico. David Leonhardt is an economics columnist for the New York Times.

David, before we get to the people and the groupings involved, what do we make of this three days in a row of press conferences, of bringing out the new team, a sense of, "We're here. We're out there"?

DAVID LEONHARDT, New York Times: I think there was a concern after last week, when Secretary Paulson announced, to some extent, the TARP was closing its doors, this relief fund that the government was running, there was a concern that people thought there was a void, that we were going to have weeks and weeks and weeks without serious economic policy, and this was going to be a period in which the economy was just getting worse.

And so the Obama team really wanted to send a message of, "We're ramping up. We're going to be ready to go on January 20th, and we're going to give you a series of heavy-hitters -- one, two, three."

So I think that was the main attempt here, to try to say that, even if they're not running the government yet, this is something that they're thinking about and they're getting ready to go.

JEFFREY BROWN: Yes, even though, because, at the same time, as he said several times, we only have one president.

EAMON JAVERS, Politico: Right.

JEFFREY BROWN: So it's a fine line there.

EAMON JAVERS: Well, sure, and they're working very closely together. I mean, the idea is that you've got an outgoing Bush administration and an incoming Obama administration that couldn't be any more different from one another philosophically and economically.

But, you know, the Treasury Department has an office on the second floor where the Obama team has set up shop right inside the building, so they're clearly coordinating all this very carefully together with an eye towards sending out a coherent message to the markets and to the global economy.

Bush, Obama teams working closely

JEFFREY BROWN: Well, I want to ask about that. How much interaction? Because, for example, yesterday -- and we talked about it on the program last night -- this announcement by the Fed and Treasury, an enormous commitment, $800 billion, two big proposals.

Now, that will commit the U.S. government and the Fed well into the Obama administration. Was there discussion about it? Do we know? Do they run these things past the Obama team?

EAMON JAVERS: We know that they run them past the Obama team. What we don't know is really behind the scenes if the Obama folks would have the opportunity to veto something like that if the Bush people really wanted to do it anyway.

We know there was communication. And, clearly, Barack Obama came out today and said that he supports this. He thinks it's a good idea. So he lent the weight of his power to it today, as well.

So clearly you've got united Obama-Bush team after a campaign season where Obama did nothing but beat up George Bush for two straight years, basically. Now they have to work together. It's really strange bedfellows.

DAVID LEONHARDT: And they have different interests here, because the Bush team wants to seem as cooperative as possible, but the Obama team doesn't actually want to seem too tied to the Bush team. They still want that...

JEFFREY BROWN: So that's their fine line, right...


JEFFREY BROWN: ... of being active, but not too tied to what's going on now?

DAVID LEONHARDT: Being active, but being active behind the scenes, so they can still get this shock of the new on January 20th.

JEFFREY BROWN: This new Economic Recovery Advisory Board announced today, Paul Volcker and Mr. Goolsbee. Why? What do you make of that?

DAVID LEONHARDT: Well, when Bill Clinton came in, in 1993, he created this National Economic Council that Larry Summers is going to run in the Obama administration. That had never existed before.

And so I think Obama's idea is that this is an even more serious time, and it requires even more brainpower.

I also think he really came to like the advice he got from this constellation of stars during the campaign -- people like Paul Volcker -- and he doesn't have as many jobs to give as he has good people he wants around him.

And so he wants a way to keep some of these people around who aren't going to accept assistant deputy secretary jobs and continue to get their advice.

JEFFREY BROWN: What do you make of that?

EAMON JAVERS: Well, somebody in the Obama camp today offered me sort of a great explanation for this, which was, these are the 3 a.m. phone call people, the people on this committee that was announced today, and these are not the incoming 3 a.m. phone calls, but when Barack Obama is lying there in bed at night worried about the economy at 3:00 in the morning, Austan Goolsbee and Paul Volcker are the people he'll be able to call and get advice, tips, explanations for how things are working, how things are being perceived, and serve sort of as a check...

JEFFREY BROWN: You mean while he's talking to Larry Summers all day and then at 3 a.m. he calls the others?

EAMON JAVERS: Right. Presumably he's going to be working very hard on this. This is a massive global economic meltdown.

But, right, he's got a personal relationship with Volcker and particularly Austan Goolsbee, who's a University of Chicago economics professor now. He's had sort of a meteoric rise here, but he's been very close to Barack Obama for the past several years and has worked inside the Obama campaign offices in Chicago during the whole campaign.

So he's a guy that Obama is used to bouncing ideas off of in real time, day in and day out.

DAVID LEONHARDT: I think you put your finger on something important here, which is Larry Summers and Tim Geithner, the treasury secretary, are not wallflowers, and so you're going to have a lot of smart people in the mix here. And it's not clear exactly who's really going to have influence. And I don't think we'll know that until they really get off the ground.

Obama courts different views

JEFFREY BROWN: Well, you know, because you mentioned the origination of the National Economic Council. I remember that under Clinton, and it was -- Robert Rubin was the first one.

And the idea then was that he was going to play the honest broker. He was going to bring everybody together and kind of gather all the ideas and then present them to the president.

Now, Lawrence Summers, Larry Summers, is always called brilliant but difficult, I guess. He has a big personality.

DAVID LEONHARDT: He does have a big personality.

JEFFREY BROWN: He's not what you'd normally think of as the person to play that honest broker role.

DAVID LEONHARDT: And not only that, but he has enormous experience in these areas, both as a policymaker in the Clinton administration, but also as a practicing academic economist. He has strong opinions about these things.

And so I think that's a big question. How do you get all these voices -- not necessarily working together, because I don't even think Obama wants that. I think he loves the idea of people arguing and him being the referee. But how do you make sure that it sort of all works?

One of the really interesting things with Summers is I think a lot of people view this as Obama wants a chance to work more closely with Summers and to consider whether he will appoint him to replace Ben Bernanke. Remember, Ben Bernanke's term ends in February 2010. Relatively early, President Obama will have to decide whether he wants to keep Bernanke on or replace him.

EAMON JAVERS: And you can also look at this as a sign of enormous self-confidence on the part of Barack Obama, because he's putting in these brilliant but prickly and sometimes difficult personalities.

He has the self-confidence to think that he can rein them all in and keep them from spending their time fighting amongst one another and actually producing good economic advice to the White House.

You know, that could go one way or the other. You could get a lot too many cooks in the kitchen here and get kind of conflicting, warring factions, or you could get sort of the best of all these people and get the best ideas into the Oval Office. But...

JEFFREY BROWN: And he reminded people of that today at the press conference of, "I will be the one"...

EAMON JAVERS: Sure. Sure. And clearly...

JEFFREY BROWN: ... "leading the change."

EAMON JAVERS: And clearly he's decided that one of the flaws with the Bush administration was that the aides that Bush selected were too much singing from the same song sheet, so he only got a very narrow set of policy prescriptions to choose from.

Obama clearly wants to reach more broadly into the thinking of all the policy options that he's got to choose from, and then he'll be, to paraphrase George W. Bush, he'll be the decider, but from a broader range of options.

Obama's plans remain consistent

JEFFREY BROWN: Let me just ask you briefly, because we talked about this before. During the campaign, you interviewed candidate Obama and you wrote about Obama economics. Any surprises to your mind in what you see now?

DAVID LEONHARDT: No, in some ways, it's remarkably consistent with what he laid out. I mean, it was clear that he was comfortable being surrounded by economists and he was comfortable being surrounded by market-oriented Democrats, Democrats who weren't too far to the left. And I think those are the main appointments that he's made.

I think he likes having the more liberal wing of the Democratic Party around, as well, and mediating between the two. But right now, the top posts have gone to people who very much come from the center, although all those people are more to the left than they were a decade ago.

JEFFREY BROWN: OK, David Leonhardt, Eamon Javers, thanks very much.

EAMON JAVERS: Thank you.