Robert Rubin’s disciples dominate Obama economic team

By Carol Eisenberg

November 24, 2008 at 2:58pm

No team of rivals, this.

If anything, Barack Obama’s economic team is stunning for its homogeneity. Timothy Geithner, Lawrence Summers and Peter Orszag are all proteges of former Treasury Secretary Robert E. Rubin, a centrist economist who was one of the key Democratic architects of the financial deregulation undertaken in the Clinton years.

Other Rubin proteges are sprinkled through the president-elect’s economic advisory team, including Michael Froman, his chief of staff at Treasury who followed him to Citigroup, Jason Furman, an economist at the Brookings Institution, and also, James P. Rubin, the former secretary’s son.

Liberal economist Robert Kuttner, editor of The American Prospect, expresses bafflement at Obama’s decision to pack his team with disciples of Rubin, an advocate of balanced budgets, free trade and financial deregulation - especially given Rubin’s central role at Citigroup, now on the brink of financial disaster.

“What kind of magic does this man Rubin have?” Kuttner asked in a recent Huffington Post column:

He was one of the key Democratic architects of the extreme financial deregulation that brought the economy to this pass. At Citi, he was one of the grand strategists of the speculation in securitized loans and off-balance-sheet gimmicks that has brought Citi to the edge of bankruptcy. Yet he continues to fall upwards. Surely Barack Obama must have noticed that Rubin is a false prophet. So why is his entire senior economic group a Team of Rubinistas?

. . .In fairness, adults are not merely tools of their patrons. In recent months, Larry Summers has disagreed with Rubin on the scale of the needed stimulus. Tim Geithner is for far more regulation than Rubin. Jason Furman, though suggested by Rubin for his campaign post of economic policy director, actually spent more of his career working for Joseph Stiglitz than for Robert Rubin. Peter Orszag has done a fine job as director of the Congressional Budget Office, and is not averse to large scale public spending.

Kuttner urges Obama to pick at least one senior economic adviser from outside Rubin’s centrist circle who would reflect the more muscular view of the government’s role favored by liberals.

But New York Times columnist David Leonhardt suggests the old, ideological battles of the Clinton years - known as the “Battle of the Bobs, Rubin versus Reich” - are now irrelevant.

Explaining the old divide, Leonhardt wrote: “On one side was Clinton’s labor secretary and longtime friend, who argued that the government should invest in roads, bridges, worker training and the like to stimulate the economy and help the middle class. On the other side was Bob Rubin, a former Goldman Sachs executive turned White House aide, who favored reducing the deficit to soothe the bond market, bring down interest rates and get the economy moving again.”

But today, against the backdrop of the most severe economic downturn since the Great Depression, Leonhardt suggests the “Battle of the Bobs” has given way to a consensus on the need for a vigorous government intervention in the economy.

Certainly, Geithner is on record in support of regulating financial instruments and Obama himself has pledged to ushering in a period of re-regulation.

Both the president-elect and his team have also agreed on a massive stimulus plan that if passed by Congress would pump hundreds of billions into an economic jumpstart - hardly Rubin’s old recipe of balanced budgets, deficit reduction and deregulation.

“Everyone recognizes that we’re looking at deficits of considerable magnitude,” liberal economist Jared Bernstein told the New York Times. “Whether it’s Bob Rubin, Larry Summers or the most conservative economist, that’s a widely shared recognition.”

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