By Michael A. Fletcher
Washington Post Staff Writer
Friday, November 14, 2008
As President-elect Barack Obama works to set his governing priorities, some of his supporters are watching warily as he weighs advice from a team of economic advisers who span the policy spectrum.
They include free traders and "fair traders," deficit hawks, Wall Street executives, corporate moguls and labor advocates. Together, they represent the broad range of thinking that Obama promised to tap to combat the deepening economic slump and fix an economy in which wages have stagnated for most workers. But they also are emblematic of the sharp differences in economic policy that have divided the Democratic Party in years past.
"He had a broad base that got him elected, including some progressives as well as some business-oriented people like [former Treasury secretaries] Bob Rubin and Larry Summers," said Dean Baker, co-director of the Center for Economic and Policy Research. "There are some real differences there. He is clearly keeping his options open."
Those differences in economic approaches played out during the first term of the Clinton administration, as Democrats vigorously disagreed over whether government should spend more on infrastructure and to directly help the middle class. President Bill Clinton settled on a more centrist approach that emphasized cutting the deficit, which ended up reducing interest rates and smoothing the way for an economic boom.
Those old debates continue to lurk in the background, even as the current economic crisis has forged a broad consensus among Democrats that, despite a federal budget deficit hurtling toward $1 trillion, the nation needs a robust stimulus package. They say the plan is needed to temper a nasty recession that could further dampen consumer confidence and raise unemployment to levels not seen in decades.
Obama has called for a stimulus plan that would extend unemployment benefits, expand the food stamp program, speed aid to the struggling auto industry, invest billions of dollars in new public works projects and funnel additional funds to state and local governments.
If a stimulus plan is not enacted during the final weeks of the Bush administration, Obama has promised that "it will be the first thing I get done as president of the United States."
But many of Obama's supporters worry about what he will do after a stimulus package is enacted. Obama's supporters at labor unions and "fair trade" groups are hoping that the new president builds an economic team determined to move quickly on a range of actions to adjust the terms of international trade, tighten control of the financial system and rebuild a fraying safety net for millions of workers.
At the top of their list is revamping the nation's health-care system and enacting the Employee Free Choice Act, which would make it easier for workers to organize unions. Obama has championed both proposals, but it is not clear how quickly he will move on them.
"People ask whether he has the fiscal breathing room to push health-care reform," said Jared Bernstein, a senior economist at the Economic Policy Institute who has served as an informal adviser to Obama. "He doesn't have the fiscal breathing room not to do health-care reform. That said, I have not seen any signals that he is backing off what I consider to be a bold, necessary agenda."
Still, many of Obama's supporters look at his advisers and worry about the path that he will choose. During the campaign, Obama frequently consulted with Summers and Rubin, as well as former Federal Reserve chairman Paul A. Volcker and billionaire investor Warren E. Buffett (a director of The Washington Post Co.), two business-oriented counselors whose involvement some analysts said seemed aimed at reassuring voters.
Before holding a news conference last week, the president-elect met with an economic advisory board that included his campaign advisers, as well as former representative David E. Bonior (D-Mich.), an outspoken critic of the free-trade policies promoted by Summers and Rubin during the Clinton administration; Los Angeles Mayor Antonio Villaraigosa; and Gov. Jennifer M. Granholm of Michigan, the state with the nation's second-highest unemployment rate.
"This is a moment of both political euphoria and unprecedented economic urgency," said Harley Shaiken, an economist at the University of California at Berkeley. "I don't think his choice of advisers was meant to convey a coherent point of view. He has put together some people that he thinks can work together but think differently. He hopes that results in some pragmatic steps forward, even though there may well be a time when things divide out."
Obama also has sparked concern among some of his supporters with the signals he has sent on trade deals. He said he would rewrite the North American Free Trade Agreement, but he later softened his position, saying he was simply interested in opening "a dialogue" with Canada and Mexico in an effort to improve the deal.
"There is some good news there, because there are a lot of people advising him who understand trade agreements and how they have contributed to our current economic problems," said Lori Wallach, director of Public Citizen's Global Trade Watch. "At the same time, you have a lot of people in his advisory group who got us into these agreements that threaten to undermine his stated priorities."
Meanwhile, some labor groups have been wary of the centrist leanings of two of the Obama campaign's top internal economic advisers: Jason Furman, a former staffer on Clinton's Council of Economic Advisers; and Austan Goolsbee, a University of Chicago economist. They are both expected to land top jobs in the Obama administration.
Robert Kuttner, an economist and author of the book "Obama's Challenge: America's Economic Crisis and the Power of a Transformative Presidency," said that Obama is well known for soliciting a wide range of opinions before settling on his course but that his principal advisers are "people who are fairly moderate, really centrist."
"My concern is that if he doesn't act very boldly, he will be in the position of chasing a deepening recession downward rather than getting out in front of it," Kuttner said. "The financial crash is also an ideological crash. He is going to have to be a more radical president than he was a candidate."