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Jeff Madrick

Jeff Madrick

Posted: July 28, 2008 10:20 AM

Who Is Obama Speaking To About the Economy?


Barack Obama has come home from the Mideast and Europe to talk about the economy. Among his first public announcements is that he will meet with former Treasury Secretaries Bob Rubin and Lawrence Summers, former Federal Reserve Chairman Paul Volcker, and billionaires Warren Buffet and Eric Schmidt, head of Google.

I am all for Obama's speaking to these people. I only hope he will speak to lots of others who can't be so easily heard, are not just good photo ops, and may have something more original to say. We already mostly know what these men will say.

Rubin and Summers speak as one. They will say that free trade must be maintained and that to deal with the pains of globalization, we need to expand the safety net -- unemployment insurance, job training, food stamps, aid to states. But they will also warn that we must continue to be wary of a budget deficit and therefore will be a singular voice for cautionary spending. They will favor modest infrastructure expansion, but as I say it will be modest. They will by and large favor Obama's ideas about tax increases for the rich, but no broad tax increases to support needed social spending.

Volcker will probably warn about a new round of inflation and how much the current scenario looks like the 1970s -- the lower dollar, higher energy and food prices, etcetera. He is a smart man so he won't push this too hard because in fact today is little like the 1970s. Wages are not automatically indexed to inflation anymore. But those kinds of issues are the ones on which he honed his instincts, and he and most of the others will again urge caution about too much stimulus becuse of future inflation. It is an old and outdated saw.

Obama may hear something fresh on energy and infrastructure, including broadband, from the two moguls. Hope so.

But Obama should be asking these men some serious question about how we got here. Why did the Clinton administration tolerate wholesale financial deregulation at home, and even the end of capital controls in developing nations? Why, when we had enormous surpluses, didn't we spend more of GDP on infrastructure? Why could Greenspan and the SEC get away with so much tolerance of banking excesses? Why was so little done about energy alternatives?

Enough of the past. I'd like to ask them about the future.

I'd want to know whether wages will ever rise along with productivity without government help? Shouldn't the minimum wage be still higher? I'd like to know what kinds of infrastructure investments to make. Can we any longer make transportation, energy and urban policy in isolation from each other. the Departments of Energy, Transporation and aprts of HUD should be merged. I'd like to get their opinions about the degree to which corporate lawlessness accounts for low wages and inequality -- the failure to abide by wage and hour laws, union organizing regulations, the prudent investment of pensions.

I'd like them to make a list of priorities. We can't do everything all at once. Which comes first, healthcare reform, energy conservation, or the budget deficit? Which comes first, reregulating Wall Street vigorously or minimal reregulation and oversight to rid the Street of "a few bad apples?" Which comes first, the principles of free trade or some pressure in trade agreements for developing trading partners to improve wages and working regulations at home and pressure on our own upsides of agricultural production? Which comes first, stanch adherence to a low inflation policy or recognition that the unemployment rate should be lower and that the low-inflation advocates just go too far?

Then I'd ask them for a list of other economists, businessmen, and advocacy groups who they respect but with whom they don't agree. And then I'd invite those people to lunch.