Continuity You Can Believe In? Spitzer, Zandi, Galbraith, and others debate effectiveness of Obama’s Economic Policies

Obamanomics…thumbs up or down?

Monday night, a packed house gathered at NYU’s Skirball Center to watch Eliot Spitzer, Mark Zandi of Moody’s Economy, economist James K. Galbraith, and others debate the effectiveness of Obama’s economic policies. The event, part of the Intelligence Squared series, was not the usual left-vs.-right stand-off.  The side arguing against the effectiveness of O’s policies included two progressives (Spitzer and GalBraith) joined by Allan H. Meltzer, a conservative professor of political economy at Carnegie Mellon. Spitzer, originally planning to argue on the Obama side, changed his position after developing grave reservations about the failure to restructure the financial sector.

In Zandi’s opening remarks, the Moody’s economist cheered the”amazing totality of the response from the Obama administration.” He likened the stress tests to FDR’s bank holidays, which served to shore up public confidence at a time of widespread panic. (The stress tests, it must be noted, did not exactly convince anyone on these pages–see Rob Johnson’s “Was That a Stress Test, Or Was That a Sears Stress Test?” and Bill Black’s “Five Unanswered Questions About the Stress Tests“).  Zandi, however, gave the stress tests and other steps taken by the administration an enthusiastic thumbs up. “What the administration has done has been highly successful,” he concluded.

Galbraith followed with a forceful critique of Team Obama’s performance. He acknowledged (disdainfully) that “free money saved the banks,” but thundered that “10% unemployment as far as the eye can see” was a “disaster.” Sound economic policy, said Galbraith, “would resolve rather than coddle big banks. It would stop displacement of people from their homes. It would help people retire with enough benefits…It would fund a lot of new green jobs.” He finished his remarks with one of the memorable lines of the evening: “Better than nothing is not good enough.”

In his opening sally, Eliot Spitzer summed up the Obama administration’s economic policies as “continuity you can believe in.” He noted that the “fundamental error of this administration is that it is continuity. They have embraced the Bush Administration view that if you solve the problem of big banks everything else flows from that. They are wrong. Too big to fail is too big. They don’t get it. The only two people I know who don’t appreciate that are Tim Geithner and Larry Summers.”

Spitzer was quick to point out his general support of Obama, but charged that “we’re giving away money to the same people” and failing to implement a “wise restructuring.” Spitzer observed that the crisis was an opportunity to change the direction of the economy, but that opportunity was slipping away. “We are still in freefall,” said Spitzer, noting a lack of affirmative news on the job front, rising foreclosures, dysfunctional credit markets, and the persistence of too big to fail banks (the last point echoed by Allan Meltzer). “We’ve been involved in a regulatory charade,” said Spitzer. He pointed out that stimulus money might have been better allocated — in the case of the auto industry, by way of example, he would have preferred that monies had gone to creating incentives for the development of energy efficient cars.

Steve Rattner, formerly counselor to the secretary of the Treasury, defended Obama’s economic policies, styling himself as somebody who understood the “real world”, ostensibly in contrast to the two academics (Meltzer and Galbraith) seated on the other end of the stage.  He sniffed that people could “sit under a shady tree at the Aspen Institute and talk about policy,” but his focus was on getting things done, which, he pointed out petulantly, was hard. Unable to include Spitzer in his condescension towards academics, he expressed surprise that someone who had held public office didn’t have more appreciation for the ‘real world’ that Rattner professed to understand so intimately. Rattner, who led the Obama administration’s efforts to deal with the auto industry, dismissed Spitzer’s idea of using stimulus money to create energy-efficient cars.

Rattner expressed great admiration for the work of the Geithner/Summers team (see Rob Johnson’s “Dynamic Duo, or Just a Couple of Jokers?” for an alternative view): “Tim Geithner and Larry Summers, the two principal economic policy makers, have strong views of principle but they are experienced, they are pragmatic. They know how to get things done. They are balanced and they are very thoughtful. And I think that the approach that they have taken throughout this process has been enormously positive.”

The audience, by a very small margin, expressed support for the Obama side of the question, which surprised this audience member, as I found the arguments much stronger on the side positioned against the motion. I suspect that Obama’s great likability is still preventing the public from critically assessing what he has been able to accomplish, particularly on the subject of economic policy, a thorny and difficult one. However, the one-point margin also suggested that a shift is occurring, and Americans are getting tired of hearing about how great things are when the banks are getting bigger and richer than ever while the rest of us are still suffering.

Click here for a Bloomberg clip featuring Zandi and Spitzer sparring by way of preview to Monday’s event.