An Economic Dream Team for the President
When President Barack Obama returns from his Asia trip, he will pardon a turkey, celebrate Thanksgiving with his family and then get down to some serious cleaning. I'm talking about his Cabinet, which Obama must soon reshape to fit the challenges of a second term.
Most of the attention has been on replacing Hillary Clinton as secretary of State and Leon Panetta as secretary of Defense. But the president's economic team is long overdue for a shake-up; Obama should reinvigorate his economic lineup, then force it to pivot from bailing out the financial system to putting the Dodd-Frank reforms into force (the most important rules have yet to be written) and finding the right mix of policies and legislation to help the economy grow faster.
One of the president's most trusted advisers, Treasury Secretary Timothy Geithner, long ago said he wouldn't stick around for a second term. Because the Treasury chief is the president's economic spokesman, liaison to financial markets and economic diplomat to other governments, Obama must choose Geithner's replacement quickly, but carefully.
The president, however, needs more than a new Treasury secretary. The big issues on his plate -- first the fiscal cliff, followed by painfully slow growth, long-term unemployment, the need for effective yet not asphyxiating financial oversight, and problems overseas, ranging from Europe's debt crisis to the rise of China as an economic powerhouse -- aren't markedly different from those of the first term. What Obama lacks are fresh brains with fresh solutions. To help the president move boldly and decisively, I've compiled his dream team:
-- Fiscal Cliff Negotiator. The Clintons always liked to portray themselves as a two-for-one deal, so for the good of the country Obama should take them up on the offer. He should ask Hillary Clinton to stay on another year while United Nations Ambassador Susan Rice goes through a tough confirmation fight to replace her. Then Obama should lean on Bill Clinton, whose convention speech was a tour de force, to help negotiate a fiscal-cliff deal. There's no better person for the job. He knows the policy trade-offs, the budget details, the politics and the players. And Obama owes the ex-president a huge debt for campaigning until his voice gave out in crucial battleground states during the final weeks of the campaign.
-- Treasury Secretary. The conventional wisdom says the job is going to Jack Lew, this administration's utility infielder. Lew had been the chief operating officer at the State Department and the budget director before Obama made him his chief of staff. Obama should keep him there. If President Clinton agrees to be the fiscal-cliff-negotiator-in-chief, he'll need a partner who knows the budget inside and out, and there's no one better for that role than Lew. Besides, the business community and Wall Street executives don't regard Lew as a heavyweight who can command respect globally.
Laurence D. Fink, the co-founder, chairman and chief executive officer of BlackRock Inc., the world's largest investment manager (with $3.6 trillion under management), meets that criterion. He is respected worldwide for his deep knowledge of markets. He could also help Obama mend fences with Wall Street. He was an early supporter of sensible financial industry reforms, including reducing the risks inherent in money-market mutual funds (BlackRock owns two dozen such funds). What's more, Fink is signaling that he would take the job, if asked.
Obama doesn't need another financial-crisis manager, but if he did, Fink knows the ropes better than just about anyone outside government: The Federal Reserve and Treasury both sought Fink's advice after the 2008 meltdown. The Fed chose BlackRock to manage the mortgage assets it acquired from the rubble of Bear Stearns Cos. and American International Group Inc.
Fink does have some baggage. Decades ago, as a managing director at First Boston, he helped pioneer the mortgage-backed securities market. That "achievement" could haunt his confirmation (though BlackRock wasn't among the investment banks that packaged low-quality mortgages and sold them to unsuspecting investors, helping trigger the financial crisis).
Naming a Wall Streeter to run Treasury would infuriate the liberal base. But Obama, who just ran his final race, doesn't need to stroke the Democratic base any longer. What he needs is to patch up relations with the business community so he can enlist its help with the fiscal cliff -- including the messy details that will need to be resolved in the first six months of 2013. If Obama and corporate leaders can make amends, that would inspire confidence, which would lead to more consumer spending, more business investment and more jobs.
-- U.S. Trade Representative. Michael Froman has been the brains behind the White House's trade agenda and other international economic initiatives. These have been limited, but that could soon change, with the Trans-Pacific Partnership and a possible U.S.-European Union trade agreement on the table. The current trade rep, Ron Kirk, has been one of the lowest-profile members of Obama's Cabinet, in part because the president didn't have an ambitious trade agenda but also because Kirk never was the right person for the job. That has to change. Perhaps more than anything Obama does in his second term, advancing a free-trade agenda holds the potential to speed up economic growth and create millions of jobs.
Froman is the rare West Wing aide with a foot in both the National Security Council and the National Economic Council. He is the sherpa who prepares Obama, his Harvard Law classmate, for economic summits, including this week's Asia trip. Froman's ability to channel the president is so strong that the world's finance ministers view him as a stand-in for the boss.
-- Secretary of Energy. John Podesta, the founder of the Center for American Progress think tank and President Clinton's chief of staff, is a wild card. But he would be an inspired choice. Podesta is an enthusiastic supporter of clean-energy programs, and could avoid the kind of political shellacking that the current secretary, Steven Chu, has taken over the failure of Solyndra LLC, the bankrupt solar-panel maker that received $535 million in federal loan guarantees. With climate change back on the national agenda, Obama needs a savvy Washington hand to push his strategy to create a self-sustaining alternative energy industry.
(Paula Dwyer is a member of the Bloomberg View editorial board. Follow her on Twitter.)
Read more breaking commentary from Bloomberg View at the Ticker.