Barack Obama has succeeded where Hillary Clinton failed. She hoped to win a third Clinton term, but it is her vanquisher who is reconstituting the Clinton administration.
Obama’s just-named nominee for treasury secretary, Timothy Geithner, served under Clinton Treasury Secretaries Robert Rubin and Larry Summers. Summers himself is Obama’s choice to head the National Economic Council. Both are part of Rubin’s circle, known for its brains and its relative moderation.
So far, President-elect Obama has acted with a ruthless pragmatism. He ignored the yowling left-wing blogosphere when it demanded Joe Lieberman’s head, turned (reportedly) to the initially pro-Iraq War Hillary Clinton for his top foreign-policy job, and staffed up with former Clintonites. Obama has been a shape-shifter throughout his brief political career, and the latest shape — an establishment Democrat determined to do whatever works — is the best version yet.
Obama appears to be reconsidering for now his promised repeal of President Bush’s “tax cuts for the rich.” Twice during the primaries, Obama hinted that he might put off the tax hikes if the economy was in distress, but he could never admit what was obvious: Proposing tax increases in the teeth of a recession was madness.
We are entering one of those periodic cycles when liberals have to bless rather than dump on a profitable private sector, because without it there’s no way for Obama to meet his pledge of creating or – in his elastic term — “saving” 2.5 million jobs. One of Bill Clinton’s most valuable insights was that a favorable business climate fostering economic growth trumped any government jobs program.
If Obama is wise, he’ll not only jettison his plans for a tax increase that in aiming at the rich would also hit successful small businesses, but also will put off his plans for a “cap-and-trade” program to tax the use of fossil fuels, forswear all his protectionist sentiments from the primaries, and ditch his support for a “card check” plan to promote the unionization of the American work force. Anything that burdens business should be anathema to Dr. Fix-the-Economy.
For now, the showpiece of Obama’s economic program is a massive stimulus bill that the Democratic Congress wants to have ready for his signature as soon as he departs the Capitol Hill steps after his inauguration. Even some conservative economists believe a fiscal stimulus is necessary to keep us out of a deflationary spiral, but Obama is only asking a Democratic Congress — given to fiscal incontinence even in rosy economic circumstances — to do what comes naturally.
In contrast, Bill Clinton ratcheted down his spending plans upon first taking office, under the influence of the very Robert Rubin who’s the mentor of Geithner, et al. Circumstances have changed, and so have the views of the Rubinites, who aren’t the fiscal hawks they were in the 1990s. The current crisis is yet another indication that a Rubinite article of faith — that the budget deficit basically determines interest rates — is false. The deficit is soaring toward $1 trillion or more while interest rates scrape bottom.
We can’t know what new twists the crisis will take (the latest financial institution in need of rescue is Robert Rubin’s Citigroup). We do know that Obama will need more than a ruthless pragmatism to navigate through it. In his masterly The Great Inflation and Its Aftermath, Robert Samuelson chronicles the extraordinary stalwartness of President Ronald Reagan when he allowed Federal Reserve Chairman Paul Volcker to squeeze inflation painfully out of the economic system the last time we had a downturn this severe, in 1981-1982.
That took guts. Obama will need them as well, and they won’t be on loan from any adviser, no matter what his pedigree.
– Rich Lowry is the editor of National Review.
© 2008 by King Features Syndicate