Obama’s economic advisers wave off such talk. They dismiss Krugman and other pro-nationalizers as engaging in mere punditry, of failing to grasp the mind-boggling practical complexity of nationalizing a bank such as Citi, with its 350,000 employees in more than a hundred countries around the world. Geithner is said to be averse to the idea—though some think Summers may be somewhat more open to it. Last July, in his former Financial Times column, Summers argued that the government should put Fannie Mae and Freddie Mac into receivership, “conserving cash for the benefit of taxpayers.” “All I can tell you,” says one administration official, “is that Larry seems quite happy with this part of the policy portfolio being known as the Geithner Plan.”
The truth, in the end, is that whatever emerges will be perceived as the Obama plan. And the president is apparently deeply uncomfortable with nationalization. “Barack’s perspective is, if you do one bank, what happens to the next weaker one and the next one and the next one?” explains someone with his ear on economics. “Where do you draw the line? How far do you end up going? What are the repercussions?” Obama, notes this person, is risk-averse in his decision-making. “He wants to know in advance the likely outcome. So he’s saying to Tim and Larry, let’s play it out—and there is no solid answer. If you do Citi, you can’t be sure what that means for B of A. You’re not sure whether Goldman and Morgan can survive as just investment banks. That level of uncertainty is something that, for them, is really hard to swallow.”
When Obama picked Geithner and Summers as his top two econo-poobahs, the main knock against them came from the left: They were both protégés of Bob Rubin. And, to an extent, it was true. Both had worked under Rubin in the Clinton administration. Both considered him a close friend, a mentor, a rabbi. Both had advocated the core policy positions that defined Rubin’s time in government under Bill Clinton: free markets, free trade, globalization, deregulation, fiscal discipline = good; big deficits, protectionism, xenophobia, class warfare = bad. In this sense, they were proponents of what became known as Rubinomics.
Two months into the Obama era, however, it’s hard to detect many traces of the Rubin doctrine in what the new president and his people have done or are planning to do in the future. The administration proposes to run a $1.17 trillion deficit in 2010. It intends to reregulate the financial industry. The reduction of income inequality is at the core of its tax and spending proposals. Its budget plan reflects “the largest commitment [to public investment] in 40 years,” notes Bob Reich. And it imagines a level of direct government involvement in the market (and particularly in the banking sector, nationalization or no) that would have Rubin spinning in his grave—if he weren’t still kicking, that is.
With an agenda like this, it might be tempting for Obama to tilt toward a full-throated kind of left-leaning populism—especially at moment when populist ire in all its incarnations is plainly in the ascendancy. Some of Obama’s political people, including his senior adviser, David Axelrod, certainly have inclinations in this direction, and are plainly worried that the populist ascendancy might threaten to derail his agenda unless he co-opts it. But honest-to-Betsy populism neither suits Obama temperamentally nor would serve his interests. In a time of profound economic paroxysm, Obama needs the private sector on his side. He needs its energies, its productive capacities, its ideas, its support. Government can help prevent the economy from spiraling down the drain, but only the engines of commerce and entrepreneurship can power it to full and lasting recovery.
The balancing act that Obama must therefore pull off is a hell of a party trick. He must court the elites without pissing off the masses and soothe and provide catharsis for the masses without alienating the elites. His political advisers, seeing his poll numbers beginning to slip, are applying their war paint and preparing to do what they do best: pick a fight with the Republicans. (Rush Limbaugh, anyone?) But however tempting this might be, Obama would do well to rein them in. Not because there’s any inherent virtue in bi-partisanship or kowtowing to Republicans. But because picking fights during a national crisis looks small, unserious, and faintly oblivious to the severity and significance of what’s occurring around us.
This is not, in short, an us-versus-them moment. It could be, should be, an all-hands-on-deck moment. Obama, I suspect, understands this better than most of the people around him. Late in his campaign, Obama gave a speech in Indianapolis in which he unfurled a kind of optimistic, soft populism that was both eloquent and perfectly calibrated for the times.
“We will all need to sacrifice, and we will all need to pull our weight, because now more than ever, we are all in this together,” Obama said. “What this crisis has taught us is that at the end of the day, there is no real separation between Wall Street and Main Street. There is only the road we’re traveling on as Americans, and we will rise and fall on that as one nation, as one people.”
He should say that again. Not just because it’s a great set of lines—but because, like all the best rhetoric, it also happens to be true.