Friday, March 14, 2008

Hillary vs Obama

A telling incident here was a debate in January where Hillary was asked about her vote for the Iraq war. If you're a Hillary supporter, her answer was that public policy is not as black as white as the hopers would like it to be. As someone who has worked inside the machinery of government and seen how complex issues like income trust taxation are demagogued in the public media debate, it's an answer I can appreciate. But there was no getting away from the fact that Obama supporters would have seen her response as lawyerly.

What gets me is that Hillary was not self-conscious enough to realize that to speak to Obama leaners she needed to drop her usual response and just state, clearly and without qualification, that she made a mistake and she regrets her decision. It's true that Hillary knows more than Obama. But I have to question her wisdom when she reinforces the popular stereotype of herself.

But all of this sort of analysis should be soundly trumped by whoever is going to be better at policy. The press is interested in what sells, and as a general rule policy doesn't sell. What sells is scandal, hence "NAFTA-gate". "NAFTA-gate" is of real interest, however, because of what it says about who Obama has appointed to advise him. This so-called "-gate" follows from what Obama advisor Austan Goolsbee told the Canadian Consul General in Chicago. Who is Austan Goolsbee?

On Jan 24 at the New America Foundation in DC the 2008 campaign advisors discussed their visions for the US economy. Participants were

Austan Goolsbee (for Obama)
Robert P. Gwinn Professor of Economics, University of Chicago Graduate School of Business

Leo Hindery (for Edwards)
Managing Director, InterMedia Partners, L.P.

Kevin Hassett (for McCain)
Director of Economic Policy Studies and Resident Scholar, American Enterprise Institute

Gary Gensler (for Clinton)
Former Under Secretary of the Treasury for Domestic Finance
Former Assistant Secretary of the Treasury for Financial Markets

Notice who is working for whom here: Obama's got a tenured academic from one of America's most prestigious MBA programs, Edwards' has a hedge fund manager who likely shares with Edwards the attribute of being so filthy rich he can easily afford to pay higher taxes, McCain has a guy from what the charitable would call a think tank and the uncharitable would call a right wing astroturf organization, while Clinton has someone with a resume closest to my own (work in the Financial Markets group of the US equivalent to our Department of Finance), although when you consider that he made great gobs of money working for Goldman Sachs, you might suggest greater parallels with the extremely accomplished Mark Carney. In any case, this who's who is itself is quite revealing. Of these four, the academic is the least likely to politically savvy. And, indeed, let's look at what Goolsbee said:

I'm a University of Chicago economist and no one is ever going to be more in favor of open markets and free trade than an economist...

No less a conservative luminary than George Will saluted Goolsbee's "nuanced understanding" of traditional Democratic issues like globalization and income inequality and concluded that he "seems to be the sort of fellow--amiable, empirical, and reasonable--you would want at the elbow of a Democratic president, if such there must be."

Now is it any surprise that Goolsbee is not going to be inclined to tell the Canadians that if his man becomes President free trade will be threatened? If Obama was seriously opposed to NAFTA, he would have never hired someone like Goolsbee in the first place. And that's the real story here.

True, Goolsbee was not as clearly free trade as McCain's man. But of note is that it was Hillary's man, Gensler, who tried to insist on "smart trade" (to which McCain's man responded, rightly, that "you need to be very very careful allowing thoughts like smart trade to leak in, because there's so many politically important interests that are opposed to free trade").

But there's more: Goolsbee shows a remarkable even-handedness when he acknowledges the work of Lawrence Lindsey and Martin Feldstein with respect to progressive taxation. In a Slate column, Goolsbee says he is a "free market type" and even goes on to argue that the Canadian health care model should not be applied in the USA! Obama has two other economic advisors, David Cutler and Jeffrey Liebman, both of whom are Harvard academics.

This has led to some Obama opposition from the left. The Nation says "Obama's disappointing foreclosure plan stems from the centrist politics of his three chief economic advisers" and a variety of lefty pundits have taken umbrage at the fact Obama's campaign has butted heads with their favourite economist, Paul Krugman ("All my criticisms of Obama have been from a progressive direction" - Krugman on Feb 12).

The bottom line? Clinton may be more knowledgeable about policy issues herself but Obama's advisors are superior. One of Clinton advisor Gensler's claims to fame is advisor to Senator Paul Sarbanes, and it is now broadly recognized that the Sarbanes - Oxley Act is a major reason why London is eclipsing New York as the world's financial centre (in fairness, McCain's man Kevin Hassett doesn't look good either after having co-authored Dow 36000). Furthermore, as someone with some exposure to all three of Treasury / Finance Departments, investing banking / Bay St, and academics, it's my opinion that the academics are the least likely to spin.

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