Obama plays to his base with fi­nan­cial team moves

Los Angeles Times - - Front Page - Peter Ni­cholas, Jim Puz­zanghera and Don Lee re­port­ing from Washington

By an­nounc­ing ma­jor changes in his eco­nomic team ahead of the midterm elec­tions, Pres­i­dent Obama is hop­ing to gal­va­nize a list­less Demo­cratic base that has been unim­pressed with the ad­min­is­tra­tion’s ef­forts to ease un­em­ploy­ment and buoy the still-trou­bled hous­ing mar­ket.

The two key moves — Lawrence Sum­mers’ exit as top eco­nomic ad­vi­sor and El­iz­a­beth War­ren’s emer­gence as a con­sumer pro­tec­tion czar — are widely viewed as over­tures to lib­eral Democrats, a vot­ing bloc that must turn out in large num­bers if the party is to stave off deep losses in the Nov. 2 con­gres­sional elec­tions.

“Larry Sum­mers was never that pop­u­lar with the base, and this pres­i­dent is desperately try­ing to mobilize the base be­tween now and Novem­ber,” said Stephen Wayne, a govern­ment pro­fes­sor at Ge­orge­town Uni­ver­sity.

At the same time, ad­min­is­tra­tion of­fi­cials in­sist Obama does not in­tend a broad re­treat from his eco­nomic poli­cies.

“The change in per­son­nel is not go­ing to af­fect the course that we’re on,” said Jared Bern­stein, chief eco­nomic ad­vi­sor to Vice Pres­i­dent Joe Bi­den. “We’re go­ing to build on the mo­men­tum that the poli­cies have helped to cre­ate.”

In­deed, there is lit­tle else Obama can do to lower the job­less rate, re­duce home fore­clo­sures or im­prove growth be­fore the Novem­ber elec­tions. The econ­omy moves too slowly for that, and so does Congress.

On Thurs­day, for ex­am­ple, con­gres­sional Democrats in­di­cated that they might put off a cru­cial de­ci­sion on whether to ex­tend tem­po­rary, Bush-era tax cuts un­til af­ter the Novem­ber elec­tion.

Obama an­nounced this week that Sum­mers would be leav­ing at the end of the year, the third mem­ber of his eco­nomic team to make de­par­ture plans pub­lic in re­cent weeks. Sum­mers had long planned to re­turn to Har­vard, but an­nounc­ing the move now is seen as giv­ing Obama a po­lit­i­cal boost ahead of the elec­tions.

A week ago, Obama ap­pointed War­ren to set up the new fed­eral agency charged with pro­tect­ing con­sumers from abuses by banks, credit card com­pa­nies and other fi­nan­cial firms. She also joined the White House eco­nomic team.

Both Sum­mers and War­ren evoke strong emo­tions among Democrats.

Sum­mers is loathed by many pro­gres­sives, who see him as tied to Wall Street in­ter­ests. At the same time, the left praised the ar­rival of War­ren, hail­ing the Har­vard law pro­fes­sor as a cham­pion of the mid­dle class.

But noth­ing in the new lineup of ad­vi­sors sug­gests Obama is aban­don­ing the path out of the deep re­ces­sion he has plot­ted over the past 20 months.

Two piv­otal va­can­cies — bud­get di­rec­tor and chair of the Coun­cil of Eco­nomic Ad­vi­sors — have been filled from within the ad­min­is­tra­tion. And al­though the White House has said Obama might tap a cor­po­rate ex­ec­u­tive to re­place Sum­mers, the team’s most se­nior mem­ber will con­tinue to be Trea­sury Sec­re­tary Ti­mothy F. Gei­th­ner, a chief ar­chi­tect of the ad­min­is­tra­tion’s eco­nomic pol­icy.

Some econ­o­mists said that strat­egy was a mis­take given the slow­ing pace of eco­nomic growth and con­tin­ued deep prob­lems in the hous­ing mar­ket. The non­par­ti­san Con­gres­sional Bud­get Of­fice fore­casts a mod­est 2.1% in­crease in real eco­nomic out­put next year, far too weak to make much of a dent in the 9.6% na­tional job­less rate.

“There’s a dis­tinc­tion be­tween shak­ing up the team and mak­ing shifts in pol­icy,” said Robert Shapiro, an eco­nomic of­fi­cial in the Clin­ton ad­min­is­tra­tion.

“The ques­tion is how much con­fi­dence do they have that, with­out ad­di­tional mea­sures, the econ­omy will strengthen on its own,” he said. “I think Larry had con­fi­dence in that six months ago … but no one has as much con­fi­dence in it to­day.”

While Obama has one eye on the midterms, he is also fo­cused on his re­elec­tion in 2012. The pres­i­dent and his eco­nomic team have been adamant that the econ­omy is on the right track and that their poli­cies sim­ply need more time to re­verse the ef­fects of the deep­est re­ces­sion since the De­pres­sion.

“We’re mov­ing in the right di­rec­tion,” Obama said this week dur­ing a town hall meet­ing about the econ­omy.

His­tor­i­cally, there’s rea­son for the White House to be op­ti­mistic. At this point in Pres­i­dent Rea­gan’s first term, un­em­ploy­ment was 10.1% and rose for three more months to 10.8%. But Rea­gan in­sisted his poli­cies would work, and though his fel­low Repub­li­cans took a beat­ing in the 1982 midterm elec­tions, Rea­gan was able to pro­claim ma­jor im­prove­ment on his way to re­elec­tion in 1984.

Now, polls show an­gry and frus­trated vot­ers mov­ing away from the Democrats. And, just as dis­con­cert­ing to the White House, many of the party’s core sup­port­ers ap­pear unin­spired head­ing to­ward an elec­tion that could shift con­trol of one or both houses of Congress to the Repub­li­cans.

Obama clearly is concerned about ap­a­thy in the Demo­cratic base.

“The sin­gle biggest threat to our suc­cess is not the other party. It’s us,” he told a fundraiser for con­gres­sional Democrats in New York on Wed­nes­day. “It’s peo­ple feel­ing like, ‘Well, we only got 80% of what we want, we didn’t get the other 20, so we’re just go­ing to sit on our hands.’ “

Geoff Garin, a Demo­cratic strate­gist, said that War­ren’s ap­point­ment might not in­flu­ence turnout so much as en­er­gize donors and grass-roots ac­tivists.

“For a lot of pro­gres­sives, she be­came a mea­sur­ing rod of whether the ad­min­is­tra­tion’s heart was in the right place,” Garin said.

Dean Baker, co-di­rec­tor of the lib­eral Cen­ter for Eco­nomic and Pol­icy Re­search, said Obama’s eco­nomic team can and should do more to im­prove the eco­nomic re­cov­ery. It par­tic­u­larly needs to ad­dress the con­tin­ued prob­lem of home fore­clo­sures, he said.

“The idea that we just stand pat and con­grat­u­late our­selves that we didn’t have a sec­ond Great De­pres­sion, which is what they’re do­ing, I think is hor­ri­ble eco­nomic pol­icy,” Baker said.

Obama should steer to the left with Sum­mers’ re­place­ment, Baker said, sug­gest­ing No­bel Prize-win­ning econ­o­mist Joseph Stiglitz, a strong pro­po­nent of govern­ment stim­u­lus spend­ing.

A White House of­fi­cial who re­quested anonymity said Obama was un­likely to name a suc­ces­sor to Sum­mers for sev­eral months.

There is no short list of can­di­dates, but among pos­si­ble re­place­ments are Laura Tyson, an econ­o­mist from UC Berkeley who held the job dur­ing the Clin­ton ad­min­is­tra­tion, and Anne Mulc­ahy, for­mer chief ex­ec­u­tive of Xerox.

Other can­di­dates could in­clude Diana Far­rell, one of Sum­mers’ deputies at the Na­tional Eco­nomic Coun­cil; Lael Brainard, un­der­sec­re­tary of Trea­sury for in­ter­na­tional af­fairs; and Cecilia Rouse, who sits on the Coun­cil of Eco­nomic Ad­vi­sors.

A nom­i­nee such as Mulc­ahy would quell crit­i­cisms from the busi­ness com­mu­nity that the pres­i­dent’s top eco­nomic ad­vi­sors lack re­al­life cor­po­rate ex­pe­ri­ence. At the same time, such an ap­point­ment would risk alien­at­ing lib­er­als.

“It is Clin­to­nian — try­ing to make all the peo­ple who hate you love you,” said Lawrence Mishel, pres­i­dent of the Eco­nomic Pol­icy In­sti­tute, a lib­eral think tank.

“The prob­lem hasn’t been that they haven’t been too at­ten­tive to busi­ness,” Mishel said. “The prob­lem is in …mes­sag­ing, and hav­ing bold enough poli­cies.” peter.ni­cholas@latimes.com jim.puz­zanghera@latimes .com don.lee@latimes.com

LARRY SUM­MERS EL­IZ­A­BETH WAR­REN

Chip Somodevilla

His pend­ing de­par­ture should cheer lib­er­als. She’s seen as a cham­pion of the mid­dle class.

J. Scott Applewhite

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