Obama to the Economic Rescue: Is He Picking the Best Team?

Three weeks after the election, the markets are rallying behind the president-elect's picks for his administration's top economic posts. In an irony that has not escaped observers critical of the selections, yesterday's appointment of two protégés of former Treasury Secretary Robert Rubin was announced along with a $300 billion federal bailout of Citigroup, the failed financial giant that has become the latest symbol of the eponymous and thoroughly discredited economic philosophy known as Rubinomics.

For those hoping for a progressive transformational presidency, the tapping of Timothy Geithner for treasury secretary and Larry Summers to advise the White House on economic policy is cause for serious concern. Will continuity, more than the promised change, define the Obama administration's thinking as it confronts the economic crisis? In a New York Times article describing how a "virtual Rubin constellation is taking shape" in the incoming administration, the liberal economist Robert Kuttner spoke for many when he asked, "Where is the diversity of opinion in this economic team? What worries me is there is not one person in the senior group who is the outsider to this club."

Relax, say others. Policy, not personnel, is what matters, and so far the major policy signals coming from the Obama team are blinking in the right direction. In Saturday's radio address, the president-elect called for creating 2.5 million jobs by 2011 through heavy deficit-spending on public infrastructure, modernizing the auto industry and developing clean energy. He also praised the decision to extend unemployment benefits and has continued laying the groundwork for an early and successful push for universal health care.

"The crisis we face makes Rubinomics irrelevant," says Robert Borosage, director of the Campaign for America's Future. "The situation drives policy, and the situation no longer allows for Rubinomics. The fact that these are Rubin protégés doesn't change that. There is no way they can go back to the old economics [of deregulation and an obsession with balanced budgets]." Borosage isn't alone in refusing to despair -- yet -- over the appointments of Geithner and Summers. His colleague at the Economic Policy Institute, the labor economist Jared Bernstein, who is frequently mentioned as a potential progressive voice in the Obama administration brain trust, recently told reporters that Mr. Summers has "truly evolved" since his days as a dogmatic free-trader and regulation-slasher.

This evolution has been charted in Summer's regular columns for the Financial Times, such as one in October, in which Summers sounded like a big-thinking New New Dealer. "[T]he crisis creates space to address longer-standing problems," wrote the former treasury secretary. "Just as patients hear advice regarding diet and exercise differently after a heart attack, so recent events should make it possible for the next U.S. administration to accomplish more than might previously have been thought possible."

Kuttner himself has notably measured his concern over Summers and Geithner, noting that Geithner has been "among the toughest on the need to re-regulate" the financial industry during his years at the New York Federal Reserve.

But even if these two former Rubin protégés are hemmed in and transformed by new realities -- not to mention the policy dictated by their boss -- the question remains: Why not hire people who were right all along, and not historic failures who are now in the process of recalibrating everything they ever believed? Why not reward people like Kuttner, Bernstein, James Galbraith, and others, who have been right all along?