On the same day US President-elect Barack Obama made public his economic team, the Bush administration announced it would again provide a guarantee and inject capital into Citigroup. The two pieces of upbeat news were like a shot in the arm, immediately sending the precarious stock market up. But the one-time stimulus will not have a long-term effect. How can the US government heal its economic illness? Obama's economic team has already started discussions on how to treat the US economy.
Obama emphasized that his criteria for choosing his economic team is "sound judgment and creative thinking." In fact, the former criterion is too abstract and hard to define. Some people have made direct comments on members of his team, such as Lawrence Summers and Timothy Geithner, who were nominated director and treasury secretary of the National Economic Council, and were both Robert Rubin1s assistants when he was treasury secretary in the former Clinton administration. Although they contributed to US economic prosperity during the 1990s they are also largely responsible for today's financial crisis. The main points of Rubin's economic policies involved increasing taxes and government spending to boost economic growth, emphasizing a reduction in the government's budget deficit, maintaining a balanced budget, and having faith in globalization and promoting free trade. These policies and measures created the longest period of economic prosperity in the US.
However, it was precisely the policy of lax governmental supervision jointly adopted by them and Greenspan that sowed the seeds of today's financial crisis. After taking the post of treasury secretary in 1999, Lawrence Summers pushed Congress to pass an act to relax controls on financial derivatives in 2000. Robert Rubin has served as executive director, senior counselor, and chairman of the executive committee of Citigroup for 10 years after his resignation. He encouraged Citigroup to pursue high profits regardless of risks, which led to today1s plight.
Timothy Geithner is one of the major advisors of the Bush administration for the US $700 billion bailout plan. But the bailout plan has undergone frequent changes and has become very confusing. For example, the government still insisted in September that no bailout plans would be adopted in spite of the collapse of Lehman Brothers, but several days later it announced to offer support to American International Group (AIG). Not long ago, the government still said there were no noticeable results for the bank bailout plan and announced to shift its focus to direct support for consumers, in areas such as credit card consumption, car loans and student loans, but now it has no choice other than to inject funds into Citigroup. When changes like this occurred over and over again, it felt like the government was only treating the problem on a symptom by symptom basis.
Of course, the US media pointed out the economic team1s previous lapses mostly as a friendly reminder rather than of out of mistrust. Generally speaking, mainstream opinion still gives high ratings to this group of economic advisors and thinks highly of their performance. For example, they helped balance financial budget, maintain economic growth and lead the US to fight against impacts and challenges brought by waves of financial crises from countries such as Mexico, Russia and in Asia throughout the 1990s. Therefore, when facing current difficulties, people cannot help recalling and yearning for the prosperous days of the past, and naturally have more trust and expectations for this team.
Given the current financial crisis now is obviously not the time to point fingers, but people have to summarize the lessons they have learned. More importantly, today1s situation is completely different from the time when they were in office, past experiences might not necessarily be useful and to follow the old ways might force them to repeat past mistakes. Firstly, one of the reasons for the widespread financial crisis was that the administration had loosened its regulations over the years and it must now give up its stance on opposing regulations. Secondly, to reverse the current economic recession, increasing taxes would only cause negative effects. It seems they should act with discretion and take cautious measures. Moreover, the priority is not to balance the budget deficit, but to further increase government spending to boost economic growth. All these necessary measures run counter to past beliefs and experiences and the only option now is to work with these measures in order for us to achieve an outstanding performance. Under these conditions, the "innovative thinking" referred to by Obama is of exceptional importance.
In fact, general public opinion also believes that, even though the economic team Obama handpicked is not perfect, one has to admit that the members are all exceptionally competent. Timothy Geithner, the designated treasury secretary, not only has outstanding competence in economic management, but also experienced living overseas and is versed in international coordination. The latter is of extreme significance because, to effectively address the crisis, one undoubtedly needs coordinated actions among major developed economies and emerging new economies. As a former president and economic professor at Harvard University, coordinating macroeconomic policies is Lawrence Summer1s strength. And appointing Christina Romer, an expert in the studies of the Great Depression of the 1930s and Franklin D. Roosevelt‘s "New Deal," as the chairperson of the Council of Economic Advisers, is making the best use of her abilities.
However, the most important thing is the right decisions made by President-elect Obama. Not only does he have a sober understanding of the crisis, he has also put forward a grand blueprint, i.e. an extremely "bold" economic stimulus plan. The plan revealed several key points, including: increasing governmental and public spending in the coming two years on projects such as the building of a large number of highways, bridges and schools; developing alternate energy and energy-saving cars; and creating 2.5 million new jobs. The brilliant part of this plan is that, not only is Obama viewing the current catastrophe as a crisis, but as a historical opportunity. Therefore, he is not just taking into account the current crisis, but is also considering long-term strategies. He is looking at providing temporary solutions, as well as, aiming at offering permanent remedies. For example, he includes education investment and medical insurance reform into the plan, and also takes energy independence and environmental protection into consideration, because these factors concern the long-term development of the nation. As Obama said, it will lay a solid foundation for the long-term sustainable development of the US economy.
By People's Daily resident reporter in Washington Li Xuejiang