Business Week: Public wrong, markets right, Obama plan working
Never mind the polls, Mike Dorning seems to be suggesting in an article for Business Week which analyzes Obama administration’s economic policies.
In a shorter version of the article for Bloomberg News, Dorning writes, “Americans believe, by an almost 2-to-1 margin, that the economy has gotten worse rather than better during the past year, according to the March Bloomberg National Poll. The market begs to differ, Bloomberg BusinessWeek reports in its April 19 edition. While President Barack ObamaÃ¢â‚¬â„¢s overall job-approval rating has fallen to a low of 44 percent, down 5 points from late March according to a CBS News Poll, the judgment of financial markets has turned positive.”
The Standard & PoorÃ¢â‚¬â„¢s 500-stock index is up about 75 percent from its recession low in March 2009. Corporate bonds have been rallying for a year. Commodity prices have surged. International currency markets have been bullish on the dollar for months, raising it by about 10 percent since Nov. 25 against a basket of six major currencies. Housing prices have stabilized. Mortgage rates are around 5 percent, down from more than 8 percent in 2000, according to data from Freddie Mac, the McLean, Virginia-based mortgage buyer.
The article includes some favorable reviews of Obama:
“We’ve had a phenomenal run in asset classes across the board,” says Dan Greenhaus, chief economic strategist for Miller Tabak + Co., an institutional trading firm in New York. “If Obama was a Republican, we would hear a never-ending drumbeat of news stories about markets voting in favor of the President.”
“There is more business confidence out there,” says Boeing (BA) CEO Jim McNerney. “This Administration deserves significant credit.”
“When you take it all together, the response was massive, unprecedented, and ultimately successful,” says Mark Zandi, chief economist at Moody’s Economy.com (MCO). Even Obama critics like Phil Swagel, assistant Treasury secretary for economic policy under George W. Bush, acknowledge that White House policies have been successful. “They could have done a better job” by spending more of the stimulus on corporate tax cuts to boost hiring and investment, says Swagel, now an economics professor at Georgetown University’s McDonough School of Business. “But their economic policies, including the stimulus, have helped move the economy in the right direction.”
“The reigning economic approach in Democratic circles for most of the past two decades has been Rubinomics, a term coined to describe a set of priorities fashioned in the 1990s by then- President Bill ClintonÃ¢â‚¬â„¢s Treasury Secretary, Robert E. Rubin, the former co-chairman of Goldman Sachs Group Inc. in New York,” Dorning writes, in comparing Obamanomics to Rubinomics.
Martin Baily, a chairman of the Council of Economic Advisers during the Clinton administration, said he believes Rubin and the rest of the Clinton economic team would have made similar decisions — on bailouts, fiscal stimulus and deficit spending — had they faced a meltdown of similar magnitude.
Ã¢â‚¬Å“I think we would have gone the same way,Ã¢â‚¬Â he said.
Ã¢â‚¬Å“A lot of people on the left were urging them to nationalize banks,Ã¢â‚¬Â Baily said. Ã¢â‚¬Å“Instead they injected capital, and now theyÃ¢â‚¬â„¢re pulling capital out. That looks more like Rubinomics than a set of socialist or left-wing economic policies.Ã¢â‚¬Â
The Obama economic team looks a lot like RubinÃ¢â‚¬â„¢s, too. Three of its most prominent members — Treasury Secretary Timothy Geithner, National Economic Council Chairman Lawrence Summers and White House budget director Peter Orszag — are Rubin protÃƒÂ©gÃƒÂ©s.
At Common Dreams, Eamons Javers notes, “Behind the scenes, Rubin still wields enormous influence in Barack Obama’s Washington, chatting regularly with a legion of former employees who dominate the ranks of the young administration’s policy team. He speaks regularly to Treasury Secretary Tim Geithner, who once worked for Rubin at Treasury.”
“According to Geithner’s public calendar, the Treasury Secretary spoke or met with Rubin at least four times in the first six months of Geithner’s tenure,” Javers continues. “Three of those chats, including an hour-long session in Rubin’s New York office, came before President Obama released his Wall Street regulatory reform proposal in June of 2009.”
Javers notes that Rubinomics is viewed by many of the Democractic “party’s liberals as too pro-market and too anti-worker.”
Weeks after beating McCain in November of 2008, The New York Times reported that “that as President-elect Barack Obama fills out his economic team, a virtual Rubin constellation is taking shape.”
Another Times article from November of 2008 added, “Instead of deregulation, Mr. Obama has sworn to usher in a period of re-regulation, to avoid the freewheeling risks that Citigroup and the rest of the financial industry undertook after Mr. Rubin, with Mr. Summers, helped tear down the regulatory walls between banks, brokerages and insurance companies, and freed them to trade in unregulated and little-understood derivatives worth trillions of dollars. Mr. Geithner spent his first years as president of the Federal Reserve Bank of New York seeking ways to at least monitor those markets better.”
Some liberals began to reconsider Rubinomics, the Times reported.
Ã¢â‚¬Å“Everyone recognizes that weÃ¢â‚¬â„¢re looking at deficits of considerable magnitude,Ã¢â‚¬Â said Jared Bernstein, an economist at the liberal Economic Policy Institute. Ã¢â‚¬Å“Whether itÃ¢â‚¬â„¢s Bob Rubin, Larry Summers or the most conservative economist, that is a widely shared recognition.Ã¢â‚¬Â
Liberals like Mr. Bernstein had long had an aversion to the kind of centrist economic policies of the Clinton years, which they felt were too concerned with deficit reduction and not focused enough on investment programs for labor and the middle class.
But Mr. BernsteinÃ¢â‚¬â„¢s past differences with Mr. Rubin have so softened that the two men recently wrote a column together about their new common ground on spending, regulation and trade protections for workers.
Bloomberg’s Dorning predicts that the public will catch up to the market view.
“With seven months to go before midterm elections, and more than two years before Obama reaches his own reelection day, there’s still time for the President’s policies to swing to his political advantage,” Dorning writes. “Again, follow the money: Consumer spending has been rising for five straight months. That may not last, but it suggests Obama is already on the right track with voters’ wallets. If the Clinton Administration is a trustworthy precedentÃ¢â‚¬â€and job growth continuesÃ¢â‚¬â€their hearts and minds could follow.”