Monday, November 24, 2008

Obama Might Abandon Campaign Promise on Taxes, Names Economic Team; Plus: Rubinomics and Citigroup

Obama Names Economic Team
Although the rumor mill had already leaked the information, Obama named his economic policy team today. Tim Geithner will head the Department of Treasury, while his mentor Larry Summers will serve as the Director of the National Economic Council. Christina Romer will head the Council of Economic Advisors.

Source: CBS News

Members of the Democratic Wing of the Democratic Party are already up in arms over some of Obama's staffing decisions. Today's New York Times adds more coals to the fire in an article that links Obama's economic team with Robert Rubin, who served as Secretary of Treasury to Bill Clinton. Liberals and progressives blame "Rubinomics" for free trade and deregulation, which they argue caused job losses and the current credit crisis. The article states that:

The president-elect’s choices for his top economic advisers — Timothy F.
Geithner as Treasury secretary, Lawrence H. Summers as senior White House
economics adviser and Peter R. Orszag as budget director — are past protégés of
Mr. Rubin, who held two of those jobs under President Bill Clinton. Even
the headhunters for Mr. Obama have Rubin ties: Michael Froman, Mr. Rubin’s chief
of staff in the Treasury Department who followed him to Citigroup, and James
Rubin, Mr. Rubin’s son.

All three advisers — whom Mr. Obama will officially name on Monday and
Tuesday — have been followers of the economic formula that came to be called
Rubinomics: balanced budgets, free trade and financial deregulation, a
combination that was credited with fueling the prosperity of the 1990s [Editor:
And the recession of the 2000s]
Source: New York Times

Speaking of Rubin: Citigroup Gets Largest Bailout Package to Date
Citigroup, the troubled financial conglomerate where Rubin serves as a Director, will receive the largest federal bailout of any financial institution to date during the present credit crisis. Under the plan, the government will give Citigroup at $20 billion cash infusion and insure losses on the bank's $300 billion portfolio of bad debt -- largely from risky mortgage instruments. Geithner helped negotiate the bailout pursuant to his role as Chair of the Federal Reserve Bank of New York.

Source: Los Angeles Times

Obama: "No New Taxes"
Taxation became a major debate issue during the general-election campaign. McCain promised to cut taxes for the "middle class," but he also said he would maintain Bush's controversial tax cuts for high-income earners. Obama, by contrast, promised to cut taxes for the middle class, but raise taxes on upper-income earners in order to fund his social programs and to prevent an explosion in the deficit. Many economic experts argued that both candidates' plans (which involved higher spending and fewer taxes) would increase the deficit. McCain's plan, however, would cause greater injury to the deficit because it would not involve any tax increases (as would Obama's).

Now, less than one month after the election, it seems that Obama's tax plan suddenly looks like McCain's. According to Reuters, Obama's team is now considering abandoning its plan to impose new tax increases due to the poor state of the economy. Wasn't the economy bad a month ago?

Source: Reuters


Anonymous said...

Is any one else out there starting to get a little worried about the early signs coming from Obama's appointments? Why all these prior insiders? Why so many white men? Surely they aren't the only ones with finance brains? Wasn't the one dissenting voice on the Clinton finance team female? (Brooksley Born, of the CFTC, who wanted to regulate derivatives, only to be shot down by Rubin, Summers and Greenspan, see NYT articles from early Oct. 2008) And how about the cynicism of appointing Hillary Secretary of State? Wasn't she the big hawk and didn't we all vote for Obama because his foreign policy positions were so much better than hers? Where the fresh wind of positive change, President Obama?

Darren Lenard Hutchinson said...

I say give him time. Honestly. My purpose is to awaken people to the need to apply pressure. The way it was going, other liberals/progressives were snoozing. I believe there is a time to celebrate and a time to be sober.

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