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Crisis management team

Cover story sidebar | Ideological moderates head new economic posts

Issue: "The Obama era," Feb. 14, 2009

Treasury Secretary Timothy Geithner, 47, apologized to Congress during his confirmation hearing for failing to pay tens of thousands of dollars in personal self-employment taxes. But the former head of the New York Federal Reserve Bank is less apologetic about spending the tax dollars of others. National Economic Council head Lawrence Summers, 54, the former president of Harvard University and treasury secretary in the Clinton administration, walks close to Geithner both in friendship and economic philosophy. Both men favor considerable public spending to remedy market woes.

"There seems to be a new vogue for the kind of Keynesian economics of the 1960s, where it was thought that fiscal policy could cure all of our economic ills," said Lawrence White, professor of economic history at the University of Missouri-St. Louis. "It's really been kind of a puzzle to those of us who thought that had all been discredited. The new consensus, we thought, was that it's monetary policy that's really important."

But Geithner and Summers aren't disliked in conservative circles and headline a team of ideological moderates. Said Geithner, who also helped fashion the incremental bailouts of the Bush administration: "We need to demonstrate with clear and compelling commitments now, that when we have effectively resolved the crisis and recovery is firmly established, that as a nation, we will return to living within our means."

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Christina Romer, Obama's pick to chair the Council of Economic Advisors, adds academic credentials to the team and is also without partisan taint. The former Berkeley professor is renowned among the top economic historians in the world, particularly for research on tax policy and causes behind the Great Depression.

Romer, 51, represents the kind of beltway outsider Obama needs. Insiders like Mary Shapiro, 53, served as SEC chairman under Clinton and is deeply connected to a regulatory system that has proved faulty. Paul Volcker, the dean of Obama picks at 81, served as Federal Reserve chairman for presidents Jimmy Carter and Ronald Reagan, presiding over the early 1980s recession. Both favor regulatory reform. But the extent to which Obama's economic team institutes long-term reform may ultimately hinge with 40-year-old Peter Orszag, Obama's pick to direct the Office of Management and Budget. Orszag will oversee a $3 trillion budget with deficits expected to run near $1 trillion for the next decade. The former head of the Congressional Budget Office says rising health-care costs and the retirement of more baby boomers will only exacerbate the problem.

Other economic players

Federal Reserve Chairman Ben Bernanke, 55, has the support of Obama's top economic advisors, none of whom have questioned his strategy of keeping interest rates low. Obama is not expected to replace the Bush holdover before his term expires a year from now.

Sheila Bair, 54, head of the Federal Deposit Insurance Corporation, is another Bush holdover whose past clashes with the White House appear to have helped her retain her position-at least until 2011 when her term expires. Bair endeared herself to Democrats with criticism of Bush's bailout plan for not sufficiently relieving homeowners facing foreclosure.

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