Recovery efforts tied to long-term deficit
WASHINGTON – Barack Obama could spend billions on the economy. He could exercise fiscal restraint.
In the president-elect’s new economic team, these are not mutually exclusive views of the world.
The leadership of the economic team Obama introduced Monday embraces a view that an economic crisis of the proportion now seizing the country requires a massive injection of money into a teetering system.
But Timothy Geithner, Obama’s selection for secretary of the Treasury, and Lawrence Summers, who will lead Obama’s National Economic Council, also are pragmatic centrists who share a distaste for large government deficits and have warned about serious long-term problems with fiscal policy.
“No one can accuse these guys of being particularly reckless,” said Jared Bernstein, a senior economist at the liberal Economic Policy Institute and an informal economic adviser to the Obama campaign.
Sen. Judd Gregg, R-N.H., the top Republican on the Senate Budget Committee, said Geithner and Summers mean “we will continue to see a clear commitment by the federal government and the new administration to do whatever is needed to ensure the solvency and orderly functioning of the credit markets and key institutions that underwrite and energize businesses across the nation.”
Summers has been showing broad flexibility as the economy tanks further, jobless claims rise and credit markets show little sign of thawing. Last week he updated his call for an economic package that was “speedy, substantial and sustained.”
That is the essence of the plan Obama unveiled over the weekend – a two-year plan aimed at creating or preserving 2.5 million jobs. The package would be far bigger than the $175 billion stimulus that Obama proposed late in the presidential campaign.
Economists have begun discussing a recovery package of as much as $700 billion over two years.
If Obama embraces a plan of that size, Geithner’s and Summer’s deficit worries could start to show, said Mark Zandi, chief economist at Moody’s Economy.com and an informal adviser to Republican John McCain’s presidential campaign.
“I would be surprised if they don’t make a commitment to long-term fiscal discipline,” Zandi said.