I am not an economist. I have been a politician. When serving in office, I trust the financial advice of those who know better than I do. We all have our limitations, and, depending on the office, the job of the politician is to develop sound policy. Likewise, I’m not likely to trust the scientific advice of other pols who tell me there is no global warming. On that, I’ll talk to the two astronomers I know. When they tell me global warming is real, I understand that they understand the science, and can draw that conclusion.
So I don’t really give a care what anyone in Congress has to say about the Bush Recession we’re stuck in as long as they choose ideology over common sense. And the Obama administration has me worried, largely because they’re worrying the New York Times’ Paul Krugman. I’ll err on the side of listening to a Nobel laureate instead of the pols, even if that politician is President Barack Obama.
Over the weekend The Times and other newspapers reported leaked details about the Obama administration’s bank rescue plan, which is to be officially released this week. If the reports are correct, Tim Geithner, the Treasury secretary, has persuaded President Obama to recycle Bush administration policy — specifically, the “cash for trash” plan proposed, then abandoned, six months ago by then-Treasury Secretary Henry Paulson.
That’s cause for concern. We certainly cannot afford to recycle the Bush adminstration’s failed policies.
This is more than disappointing. In fact, it fills me with a sense of despair.
After all, we’ve just been through the firestorm over the A.I.G. bonuses, during which administration officials claimed that they knew nothing, couldn’t do anything, and anyway it was someone else’s fault. Meanwhile, the administration has failed to quell the public’s doubts about what banks are doing with taxpayer money.
And now Mr. Obama has apparently settled on a financial plan that, in essence, assumes that banks are fundamentally sound and that bankers know what they’re doing.
Barack Obama is a brilliant politician, but I’m afraid he’s reached his own, “Good job Brownie!” moment. We can’t afford to hold on to Tim Geithner if he’s too entrenched in Wall Street group-think to think us out of this mess. Obama campaigned on change, and the President must accept the fact that everything has changed already. Our economy is not the same. This recession is a different animal, and it doesn’t want to die.
Krugman proposes a better solution:
As economic historians can tell you, this is an old story, not that different from dozens of similar crises over the centuries. And there’s a time-honored procedure for dealing with the aftermath of widespread financial failure. It goes like this: the government secures confidence in the system by guaranteeing many (though not necessarily all) bank debts. At the same time, it takes temporary control of truly insolvent banks, in order to clean up their books.
That’s what Sweden did in the early 1990s. It’s also what we ourselves did after the savings and loan debacle of the Reagan years. And there’s no reason we can’t do the same thing now.
If I’m the guy making policy, I’m listening to the guy with the Nobel Prize, not the guy trying to make the same broken clock tick.
Mr. President, it’s time to trust economists. Pick up the phone and give Paul Krugman a call.