Not long after leaving the Obama administration, Orszag received an e-mail from David Shipley, then the New York Times’ deputy opinion editor. “We’d really like to get you involved, can I come see you?” he wrote.
Shipley’s offer of a semi-regular economics column intrigued him. For Orszag, writing was something that came naturally. Joseph Stiglitz recalled how he had often assigned Orszag, when he was a 25-year-old member of his staff on the Council of Economic Advisers, to write weekly economics briefings for President Clinton. “Peter is one of the people who can write well,” Stiglitz told me.
A few days later, Orszag and Shipley met, and Orszag agreed to sign on as a columnist. Orszag told Shipley that he wanted to write his debut column about the debate raging in Washington over whether to extend the Bush tax cuts. Congress was preparing to return from recess to vote on the issue. Obama was in full campaign mode, aggressively stumping to let the tax cuts for families earning more than $250,000 per year expire while upholding his signature campaign pledge of preserving the middle-class tax cuts. Orszag argued that Obama should accept a temporary extension of all the Bush tax cuts, then let all of them expire in 2013, including those to the middle class. Orszag’s plan made a certain amount of economic sense from a deficit-hawk perspective—keep the money pumping through the system at the depths of the recession, and then, when things got better, focus like a laser on the deficit. But Obama’s political advisers, as well as Summers, thought it politically daft, seeing as Obama had promised to make the middle-class tax cuts permanent, and also suspected that the Republicans would renege on any such deal about the tax cuts, leaving the Obamans with nothing for their concession. Orszag now says his views on taxes and the deficit were one of the factors that made him decide to leave. “I didn’t think I could be an effective advocate for the administration on making the tax cuts permanent, and I didn’t want to be in office when that happened,” he told me.
The column appeared on September 7, 2010. “The debate was approaching, and I felt like I would regret not speaking out,” Orszag said.
The alliance among Wall Street, Universities, and the White House is the military-industrial complex of our time.
Not surprisingly, the White House was outraged by the op-ed’s timing and content. Orszag’s column provided powerful ammunition to Republicans who were winning with the argument that repealing the Bush tax cuts during the flagging recovery would be bad news. The press seized on the op-ed as evidence that Obama’s brain trust was split on the issue. At a briefing that morning, reporters grilled press secretary Robert Gibbs about Orszag’s column. In private, Rahm Emanuel was upset Orszag hadn’t told him the column was being published. Orszag e-mailed Emanuel to refute the claim he hadn’t alerted anyone in the administration. When I ask Orszag about the op-ed dustup, he told me: “I provided a very senior official in the White House with a very specific heads-up.”
Orszag’s move to Citi not long after the op-ed controversy created more political baggage for the White House, as the administration sought to tamp down populist anger while repairing frayed ties to the business community by hiring former JPMorgan executive Bill Daley and swapping out Paul Volcker with GE CEO Jeff Immelt.
Orszag may have been branded a sellout, but his decision to join Citi wasn’t a matter of simple favor trading. As OMB director, Orszag wasn’t involved in the White House’s banking policy. But as traders and politicians know, perception is often reality. That Orszag was hired so quickly by Citi allowed some to ask who Orszag had been working for all along. But the real dissonance was that most Americans don’t understand the career paths of the meritocracy.
More than anyone else, it was Bob Rubin who made the Democratic revolving door work as smoothly as it has. In earlier years, Wall Streeters were probably not much less powerful in Washington, but the dominant model was that of the tycoon—Averell Harriman, say—who became a statesman. But in Rubin, the roles were somehow fused—he became a financial statesman. The role depended on a surprisingly explicit syllogism, with its own echoes of an earlier American age: What’s good for Wall Street is good for America, and vice versa.
As Treasury secretary, Rubin presided over a remarkable period in the American economy. He arrived in Washington after a storied 26-year career on Wall Street, culminating in the co-chairmanship of Goldman Sachs. Rubin learned early the value of establishing relationships with powerful mentors. Later, he’d attract his own group of devotees, including Orszag, Tim Geithner, and Summers. He’d joined Goldman as a junior trader in 1966, and was taken under the wing of legendary arbitrageur L. Jay Tenenbaum. “Bob was hired as a Young Turk to sit at his desk and do what he was told,” recalls former Goldman partner Roy Smith. “He had a natural intuition for the risk-arbitrage business.”