Note to Self: Steps Toward a Model of Flight to Safety in a Solvency Panic
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We do not yet have an Obama-Biden administration economic policy team. We do not yet have nominees sent up to the Senate. We do not yet even have people who have been designated to be nominees sent up to the Senate on January 21, 2009. What we have are people about whom it has been leaked that they are going to be designated as the people to be nominated: we have a bunch of nominee-designate-leakees for three slots. They are:

  • Peter Orszag: OMB Director-nominee-designate-leekee. The Director of the Office of Management and Budget is the guardian of budgetary rationality: Do the government’s tax and spending plans add up? Do they make sense? Are the right departments being given the money then need—and are they spending it the right way? Are the entitlement programs the right size and targeted the right way? The Bush II administration was marked by a series of extraordinarily weak OMB Directors who essentially did not try to do their jobs—and the country is much the worse for it. The Bush I and Reagan administrations were marked by very strong but devious OMB Directors who did not work and play well with others—and so in the end failed to do their jobs. Peter Orszag is either the best or one of a very small group of people who are the ones best qualified for this job.

  • Austan Goolsbee: CEA Chair- nominee-designate-leekee. The Chair of the President’s Council of Economic Advisers is the guardian of economic rationality: Do the government’s policies make economic sense, or are they bad for the long-run health of the economy? The CEA was created after World War II by the Employment Act of 1947. After the Great Depression and the federal government’s assumption of the role of macroeconomic management and stabilization, it was thought that economists had something to say about this, that as a result that economists needed access to the president, and that this access should be institutionalized. During the Bush II administration the CEA’s offices were moved out of the Eisenhower Executive Office Building and thus out of the bubble that is the White House Complex. As a non-negotiable condition of his taking the job, Austan should insist on at least his two deputies—the other two members of the CEA—having offices inside the Eisenhower EOB. Six eyes can cover three times as much ground as two, and a surprisingly large share of the business of government is done by wandering around the Eisenhower building and the White House talking to people in hallways (or just hanging out in the Starbucks at 17th and Pennsylvania and talking to whoever comes by).

  • Jack Lew: NEC Chair-nominee-designate-leekee. The Assistant to the President for Economic Policy chairs the cabinet-level committee on economic policy, and together with their staff serves as the traffic cop for the paper and issue flow on economic policy into the president. The NEC Chair’s job has two components: First, to guide the economic policy team as they hammer out a consensus view on what the best economic policy is in order to leave as few points of entry for spin doctors, lobbyists, or rogue vice presidents to twist economic policy in destructive directions. (The Bush II NEC chairs never understood that this was their principal role, and so they were all catastrophic failures at the job.) Second, in cooperation with the chief of staff, to make sure that the president hears not what he wants to hear but what he needs to hear. This usually means that the president gets pissed off at the NEC chair (and chief of staff) at some point: the best analogue to these jobs comes from track-and-field: javelin catcher. (Condi Rice is the most striking example in recent times of an assistant to the president who simply did not do her job: as NSC chair she set out to make sure that the president heard what he wanted to hear and not what he needed to hear, and in a good world she would now have no entrée into polite society.)

There are far more jobs that have not yet been filled, even in the most provisional fashion:

  • Peter Orszag’s naming as OMB Director-nominee-designate-leekee leaves a hole at the equally important post which is the OMB Director’s Capitol Hill shadow: the Director of the Congressional Budget Office. My favorite candidate for CBO Director is Doug Elmendorf of the Brookings Institution.

  • Federal Reserve Chair-nominee-designate-leekee. Ben Bernanke’s term as Fed chair is up in two years. Ben might not want to continue—it’s been a rough ride. And Ben will probably be damaged goods: too many people who think that he gave away too much public money to feckless financiers and too many other people who think that he has not done enough to protect and stabilize the financial system. I think Ben has done a good job—certainly a much better job than I would have done in his shoes. But I think the odds are that a fresh start would be good, and for policy continuity it would be a good idea to designate Ben Bernanke’s probable successor now.

  • Treasury Secretary-nominee-designate-leekee. There are two ways to go with Secretary of the Treasury: First, to choose somebody with as much gravitas as possible—a Warren Buffett or a Paul Volcker—and give them as a deputy somebody extremely capable but perhaps not yet of sufficient financial stature to be the ideal choice for the top job. (My favorite candidate for Deputy Secretary if the Obama-Biden administration goes down this road is Laura Tyson.) Second, to sacrifice some gravitas and to instead choose the smartest and most energetic person with sufficient knowledge of finance. (This is my preferred option: and my preferred candidate is Larry Summers.) As far as the Treasury is concerned, the bench is thinner than I had first thought: you need somebody who (a) knows finance, and (b) hasn’t been making a fortune over the past five years by benefiting from the creation of the mess that the government must now clean up.

  • Financial Regulatory-Legislative-Czar-nominee-designate-leekee. Somebody is going to have to design and win broad congressional support for the reformed financial regulatory system that we need. A Treasury Secretary who tries to do this job in addition to all the other responsibilities of the Treasury Secretary will be spread much too thin to be effective. My favorite candidate for this job is Sheila Bair. Here profiting from the creation of the mess is not a disability for the same reason that FDR chose Joe Kennedy to be the first Chair of the Securities and Exchange Commission.

  • Trade Czar-nominee-designate-leekee. This will, I think, turn out to be a much more important job in the Obama-Biden administration than people recognize. Trade agreements are a principal way that we deploy our foreign policy soft power. And trade sanctions are, I think, going to be a principal tool in the construction of the system of global governance to fight global warming.

  • Secretary of Labor

  • Secretary of Commerce

  • Secretary of Transportation

  • Secretary of Energy

  • Secretary of the Interior