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Robert Kuttner, co-founder and co-editor of The American Prospect Magazine speaks to Paul Jay about Obama’s economic team, and the stimulus package. He speculates Obama is realizing the limits of bipartisanship in his attempt to make his stimulus package a reality.
Kuttner says Obama’s economic team is trying to utilize the same methods to resolve the economic crisis that have led to the financial meltdown. He further ventures that the plan put forward by US Treasury Secretary Timothy Geithner is a failure.

Story Transcript

Conservative solutions to a radical crisis

PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. We’re now talking to Robert Kuttner, who is the editor and co-founder of American Prospect Magazine. He is also a senior fellow at Demos, which is a policy think tank and advocacy group. And he was a longtime columnist for BusinessWeek and continues to write for The Boston Globe. Thanks for joining us.


JAY: So you wrote recently radical times or radical crises require radical solutions, and you expressed some concern about Geithner’s banking bill, and maybe even suggesting on the stimulus package as well that we’re not seeing anything that would suggest this radical solution, and as a result, it’s not really going to address the urgency of the problem and perhaps will allow this crisis to get even worse than it might have to.

KUTTNER: Well, right. Of the two of them, I think the stimulus package can be defended as a down payment on the kind of public outlay that we need. It’s about half of what we need, a little less after the Republicans got through with it in the Senate. I think, after less than a month in office, Obama has realized the limits of bipartisanship. He finally, after making conciliatory gestures to the Republicans, realized that this wasn’t getting him anywhere. And he made a trip to Elkhart, Indiana, and fashioned a narrative of how this is affecting real people, and then came back, did his first press conference, and essentially said, “Look, I’m going to extend an olive branch to the Republicans, but if the Republicans are not going to be helpful in this crisis, we’re going to do what we need to do.” That’s a very deft high-wire act. I think the banking bill is even more of a problem. What Geithner has tried to do is essentially rebuild the whole system that got us into trouble. He wants hedge funds and private equity companies to get loans from the Federal Reserve so they can speculate in these toxic securities, and he hasn’t figured out any of the details. He’s averse to direct public ownership of the banks, not nearly as radical an idea as it sounds. The Federal Deposit Insurance Corporation does it several times a week. Every time a bank goes bust and it’s insured by the FDIC, FDIC doesn’t just throw money at it; the FDIC comes in, fires the old management, the shareholders lose everything, the FDIC takes it over. They’ve been doing this since 1933.

JAY: And there’s the Swedish model. Maybe talk about that, ’cause it’s not like we haven’t seen this before.

KUTTNER: Yeah, the Swedes. But, you know, that’s Sweden. Oh my God. This is America. We do this in America all the time.

JAY: I mean, actually, why don’t we just talk about that a bit, in terms of we’re in a time of such crisis, isn’t it about time we forget about all the Cold War bogeymen? And, actually, I thought one of the best moments of the election campaign was when McCain was accusing Obama of being a socialist, and instead of cringing in fear of the Cold War rhetoric, Obama said, “Well, okay, I am my brother’s keeper. What do you want to make out of it?” Isn’t it time to take on all these demons and actually try to solve the problem?

KUTTNER: Well, socialism is a scare word in the United States, but I think Obama can say, “Look, drastic times require drastic remedies, and we’re going to do what we need to do. And government is part of the solution. And trade unions are part of the solution.” And he’s been pretty good at the level of rhetoric. It’s taking him awhile to catch up at the level of policy.

JAY: And who he’s picked to make policy.

KUTTNER: Oh, absolutely, ’cause there’s this huge undertow of conventional thinking about budget deficits, conventional thinking about the role of government, and, yes, he—.

JAY: Within his own camp.

KUTTNER: Well, in the country in general and within his own camp. And I think there’s a very interesting back story about how he ended up with these guys. Put yourself back to April 2008. Obama suddenly realizes that he may well be the nominee, and at that point he had an economic policy staff of one, a guy named Austan Goolsbee, who was a friend of his from the University of Chicago. Not a household word, not a particular progressive, not even a first-rank economist. So his political advisors said, “Oh my God—we got to get the A team in here.” So in April of ’08, when Obama is being attacked in terms of “You don’t know who this guy really is. He’s really a Muslim. He’s really some kind of dangerous radical. He hangs out with terrorists,” their whole strategy was: “We’ve got to reassure public opinion that he’s a grownup, that he’s got the heft to do this, that he’s not a crazy radical.” So where do they go for their economists? They go to the veterans of the last Democratic administration, which at that point was still remembered as a successful era, so Summers and all the other protégés of Rubin. And I think he ended up with a bunch of centrists at best, who were the perpetrators, along with the Republican Congress, of all of this deregulation that got us into this problem.

JAY: There’s also been some critique that some of the early Obama money came from Wall Street. And, in fact, there’s some indication that Wall Street gave more money to Obama than to Hillary Clinton.

KUTTNER: Sure. And a lot of the fundraisers were Wall Street guys. And one of the key people on his transition team who picked—not picked personally, ’cause Obama appointed him, but teed up the appointments of the top regulatory and economic officials was Jamie Rubin, Bob’s son. So here’s [Bob] Rubin. He’s been twice disgraced. He was disgraced as treasury secretary when you look back at all the deregulation that he presided over. Then he was disgraced again as the guy who helped run Citigroup into the ground. But he still has this ability to pull the strings in terms of the number of protégés who he’s placed in key positions, in terms of his own son being on the transition team in a key power role. And, you know, Obama likes to invoke Doris Goodwin’s book about Lincoln, Team of Rivals. Sometimes I think the team of rivals is Obama versus his own staff, because I think his own instincts are somewhat better than theirs. But until he gets control of this, they’re going to be pulling him to the right.

JAY: People like [Richard] Reich, who didn’t end up with any kind of a serious job, were talking about getting money to the poor quickly, who will spend it quickly. Live up to this promise of if you’re going to tax, tax the rich more and [inaudible] the more serious tax cuts to working families. In terms of how you’re articulating your take on this, you’re being a little bit more up-front about, I would say, a critique of this, whereas we’re hearing from some others that you can’t criticize Obama right now because he’s fighting with the right. And what do you think, in terms of tactics, how one from a progressive side talks about this? Shouldn’t people just be forthright?

KUTTNER: Well, our message is very simple. We think Obama has the potential of being a great, transformative president, but he’s got to think bigger than he’s thinking. We compliment him when we think he’s on the right track. We’re critical when we think he’s on the wrong track. We think the stimulus package is a very good first step but it’s not enough. We think the Geithner plan is a disaster that’s going to fall of its own weight. But we want him to succeed as a progressive president. So I think the progressive movement in the United States is really in the same relation to Obama as the abolitionist movement was in relation to Lincoln, as the industrial labor movement was in relation to Roosevelt, and the civil rights movement was in relation to Lyndon Johnson. Presidents who are progressives do a dance with social movements. Sometimes they feel social movements are putting too much pressure on them. Sometimes they use social movements to put pressure on them so that they can do the right thing. And I have no doubt that this is going to be the pattern with Obama.

JAY: Okay. In the next segment of our interview, let’s talk about just what are you pressuring for. Please join us for the next segment of our interview with Robert Kuttner.


Please note that TRNN transcripts are typed from a recording of the program; The Real News Network cannot guarantee their complete accuracy.

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Robert Kuttner is co-founder and co-editor of The American Prospect, and professor at Brandeis University's Heller School. His latest book is Debtors' Prison: The Politics of Austerity Versus Possibility. He writes columns for The Huffington Post, The Boston Globe and the New York Times international edition.