After Democratic Gains, Infighting Begins

Martin Kady, deputy congressional editor for Politico, offers his insight on the internal power struggles between Democrats now that they have a majority on Capitol Hill.

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MICHELE NORRIS, Host:

Back in August, David Leonhardt of the New York Times wrote an exhaustive profile of then-candidate Obama's economic policies. It came with the memorable headline "Obamanomics." At that time, Mr. Obama was a bit of an economic enigma. Many conservatives considered him too liberal, while some liberals thought him too conservative.

Now that President-elect Obama has named many of the key advisers who will try to guide him and the rest of us out of the current downturn, we wonder what Mr. Leonhardt makes of these new hires and what more they tell us about Obamanomics. And so, David Leonhardt joins us now. Welcome to the studio.

DAVID LEONHARDT: Thank you.

NORRIS: So let's cut to the chase. Any names that have surprised you so far this week?

LEONHARDT: I don't think so. I think the only thing that's surprising, perhaps, is that Larry Summers, who Obama has named as his chief economic aid inside the White House, is going to play a high-profile role and will not be Treasury secretary. I'd give you a look - historically, someone who was Treasury secretary in the past, it would have been hard to imagine them in any other job. But these aren't ordinary times, and so it's actually not shocking under these circumstances that Larry Summers would take that job.

NORRIS: But the consistency in terms of the people who advised him throughout the campaign, advised him in those critical weeks in September when Wall Street seemed to go to the dogs, many of those people are now standing on either side of him as he's at (unintelligible) rolling out his economic team.

LEONHARDT: That's absolutely right. I think there's one thing that's remarkably consistent with where he was this summer and one thing that's different. The thing that's consistent is the people that he's appointing.

Obama has always liked to surround himself with economists. If you look at his team relative to Hillary Clinton, Hillary Clinton had a lot of lawyers who were very interested in economic policy. Obama had a lot of classically trained PhD economists, and you see that again this week. Larry Summers, Austan Goolsbee, Christina Romer, these are people with PhDs.

What's different is the reality. We have a financial crisis that's much worse than it was this summer, and so I think we're likely to see those same people making different kinds of recommendations than they would have back in June or back in February.

NORRIS: Now, one key person who is going to be serving as the Treasury secretary committee, Geithner, is not an economist.

LEONHARDT: That's right. He's not. He's not a lawyer either. He spent much of his career around economists, though. Larry Summers has been an important mentor for Tim Geithner. He is also a protege of Robert Rubin's, Geithner is. And Rubin has cultivated a whole group of people who tend to think like economists. And so while, Geithner is not, he does very much come out of that world, and he shares this sort of market-oriented, but increasingly redistributionist view that the centrist Democrats have.

NORRIS: In your original Obamanomics article, you talked about Barack Obama being pulled by these twin forces, in this case, two men named Bob, Bob Reich and Bob Rubin. Tell us a little bit about the sort of warring ideology there between these two men.

LEONHARDT: When Bill Clinton came into office, he came in having promised to make big investments in what he called the middle class, and pushing that was Bob Reich, a long time friend of Clinton's and his labor secretary.

Bob Rubin, who'd come from Goldman Sachs and was inside the White House, argued instead, no, we need to cut the deficit. If we cut the deficit, the economy will start growing, and everyone will be better off.

In the short term, Rubin very much won that debate. Clinton did what he wanted and what Rubin predicted happened. But in the long term, it's not so simple because Reich was right that inequality was a problem that couldn't simply be solved by a growing economy.

And we now see those two Bobs, those two sides that are exemplified by the two Bobs come much closer together, and the Rubin crowd agrees that we need to do more to invest in the country, even if it means over the short term running some larger deficits.

NORRIS: But if you look at the economic advisers that President-elect Obama has rolled out in the past three days, it would appear that Bob Rubin has won that battle?

LEONHARDT: That's right, although his side has very much moved toward the left. They have very much moved toward Reich, and Obama himself talks about that. He talks about how Rubin and particularly how Larry Summers sound much more like Bob Reich than they used to.

NORRIS: This week, President-elect Obama has talked both about massive spending on another stimulus package that would potentially cost hundreds of billions of dollars. He's also talked about the need for making budget cuts. Again, more forces at work?

LEONHARDT: Absolutely. And over the short term, I don't think they want to make many budget cuts because, as wise as they might be and as much pork as we have in the budget - we have enormous pork - you don't want to do it in the short term because it essentially acts as a damper on the economy.

If you look back to the '30s, it's fascinating. Franklin Roosevelt came into office talking about getting rid of the deficit, which would have been a disastrous move, and the Obama people very much believe that. So, I don't think we're likely to see them doing lots of cutting in the short term. In the long term, they have to and they want to because they have priorities they want to pay for.

NORRIS: David Leonhardt is an economics columnist for the New York Times. He joined us here in the studio. Thanks so much for coming in.

LEONHARDT: Thank you.

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