Obama adds Volcker to economic team
Amid fresh signs of financial troubles, President-elect Barack Obama announced Wednesday that he was tapping a seasoned figure from past economic struggles to head a new advisory panel dedicated to creating jobs and stabilizing the markets.
Obama said that former Federal Reserve Chairman Paul A. Volcker, 81, would head the committee, bringing into his circle of top economic advisors a man credited with curbing the high inflation rates of the late 1970s.
Obama announced the appointment in his third news conference in as many days -- all devoted to the economy, all meant to imbue confidence in a nation clearly shaken by the economic tumult.
A series of government reports Wednesday offered a grim assessment of current conditions. Americans have curtailed spending to levels not seen since the Sept. 11, 2001, terrorist attacks. Orders to U.S. factories and home sales have dropped, and the four-week average for jobless claims reached its highest level since 1983.
The spate of unwelcome news has forced Obama to move more quickly than some past presidents-elect in constructing his economic team. Though he has cautioned that the nation only has “one president at a time,” he has been compelled by fast-moving events to reassure jittery investors and anxious consumers that a recovery plan is in the works.
On Monday, Obama announced his choice for Treasury secretary, Timothy F. Geithner, president of the Federal Reserve Bank of New York. And Tuesday he rolled out his new budget director, Peter R. Orszag, who comes from the Congressional Budget Office.
David Axelrod, a senior advisor to Obama, said: “There is no doubt we have a crisis of confidence right now. And there’s enormous interest in the financial markets and in the country generally about what his plans are and who he will rely on for advice in executing his plans. And we felt that we needed to move very quickly and send those signals.”
He added: “It’s a signal of his seriousness about the economy and his recognition of the gravity of the challenge that we face that he chose to accelerate that process.”
Apart from Volcker, the new economic advisory panel will include Austan Goolsbee, a University of Chicago economist who will serve as staff director.
Goolsbee advised Obama during the campaign and was mired in an embarrassing controversy during the Democratic primary season.
Canadian government representatives said Goolsbee had privately assured them that Obama’s criticism of the North American Free Trade Agreement amounted to mere campaign posturing. Obama’s rival at the time, Sen. Hillary Rodham Clinton, seized on the episode as a sign that Obama was pandering to voters. Goolsbee denied that he had told the Canadians any such thing. After the dust-up, his public profile dropped considerably.
In the tightly controlled news conferences this week, reporters were barred from questioning Goolsbee, Volcker or any of the other economic officials Obama introduced. Obama has kept the news conferences spare -- limiting the number of questions and avoiding any ceremony. With no introduction, he has simply entered the small hotel conference room where the events are held and begun speaking. The decor is minimalist: a lectern and American flags
Volcker is part of a roster of Obama appointees steeped in Washington’s political culture.
Next week, the president-elect is to unveil his national security team. He is expected to name Clinton as his secretary of State and to retain Robert M. Gates as Defense secretary.
Asked whether he could stock his administration with such Washington insiders and still carry out his promise to transform Washington, Obama stressed that the overall governing vision comes from him.
He said the “conventional wisdom floating around Washington” is that “there’s a recycling of people who were in the Clinton administration.”
Explaining his recruiting methods, Obama said he was simply drawing from a pool of talent with government experience.
He said, “I suspect that you would be troubled and the American people would be troubled if I selected a Treasury secretary or a chairman of the National Economic Council at one of the most critical economic times in our history who had no experience in government whatsoever.”
Obama’s mood this week was sober, reflecting the grim economic news.
The Commerce Department said that consumer spending, which propels economic activity, dropped by 1% last month.
Friday is the traditional start to the holiday shopping season. Should people hit the malls? Obama was asked. The president-elect said he would lead by example, with his two daughters in mind.
“Well, we are going to do some Christmas shopping, and Malia and Sasha have already put their lists together,” he said. “It’s mostly for Santa. They send their letter every year. But we may do some extra shopping as well.”
He continued: “There is no doubt that during tough economic times, family budgets are going to be pinched. I think it is important for the American people, though, to have confidence that we’ve gone through recessions before, we’ve gone through difficult times before, that my administration intends to get this economy back on track.”
An important figure in any recovery will be Volcker. At 6-foot-7, Volcker is a towering figure in economic circles, in every sense. He was appointed Fed chairman by President Carter in 1979, stepping down in 1987. During that time, U.S. News & World Report called him the second most powerful man in the country, behind President Reagan.
Volcker won acclaim as the man who tamed “stagflation,” the combination of stagnant economic growth and high inflation that persisted through much of the late 1970s and early 1980s. Inflation became so embedded in the U.S. economy after the oil shocks of the 1970s that repeated attempts to reduce it had failed.
Volcker curtailed inflation by tightening the U.S. money supply and driving up interest rates.
Consumer demand plummeted, and the economy went into a deep recession, but finally the nation began a period of what Volcker called “disinflation” that set the stage for the strong growth and the bull stock market of the 1980s.
By the time he left the Fed to join an investment bank and teach at Princeton University, the economy had weakened. But Volcker’s reputation was still solid. He was recruited for prestigious boards and commissions, including one this decade that investigated the multibillion-dollar oil-for-food scandal at the United Nations.
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Times staff writer Ralph Vartabedian contributed to this report.
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PAUL ADOLPH VOLCKER
Age: 81; born Sept. 5, 1927, in Cape May, N.J.
Experience: Independent Inquiry into the U.N. Oil for Food Program, 2004-05; chairman, James D. Wolfensohn Inc., 1988-96; professor of international economic policy, Princeton University, 1988-95; chairman, National Commission on the Public Service, 1987-90, 2002-03; chairman of the Federal Reserve, 1979-87; president, Federal Reserve Bank of New York, 1975-79; undersecretary, Treasury Department, 1969-74; deputy undersecretary of monetary affairs, Treasury Department, 1963-65; director, Treasury Department’s Office Financial Analysis, 1961-63; vice president, director of forward planning, Chase Manhattan Bank, 1965-68; financial economist, Chase Manhattan Bank, 1957-61; economist, Federal Reserve Bank of New York, 1952-57.
Education: bachelor’s degree, Princeton University, 1949; master’s degree, Harvard University, 1951; postgraduate work, London School of Economics.
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AUSTAN DEAN GOOLSBEE
Age: 39; born Aug. 18, 1969, in Waco, Texas
Experience: professor of economics, University of Chicago, 2001-present; member, U.S. Census Advisory Committee, 2001-06; special consultant for Internet policy, Justice Department, 2000-01; associate professor of economics, University of Chicago, 1999-2001; assistant professor of economics, University of Chicago, 1995-99.
Education: bachelor’s degree, Yale University, 1991; master’s degree, Yale University, 1991; Ph.D., MIT 1995.
Source: Associated Press
