According to news reports, President Obama may soon pick Roger Altman, a former Deputy Secretary of the Treasury under President Clinton, to replace Lawrence Summers as his chief economic advisor. I just listened to an hour long July 2009 interview that Charlie Rose had with Altman, you can watch it here.
The good news is that Altman is a budget deficit hawk. More good news is that he thinks the higher U.S. private savings rate is a good thing because it will help long-term growth. Maybe he will bring some long-term thinking to the U.S. government.
The bad news is that he doesn't understand mercantilism. He thought that the trade deficits would stay down after the November 2008 crash. He did not foresee that our trade deficits would shoot up and stifle the recovery because the Asian nations would increase their mercantilist predations. He did not realize that China intentionally keeps its people's savings high by denying them credit.
He is not one of the economists who actually understands what is happening in the world at the moment - that the United States is in the state of persistent depression which comes to countries that let their mercantilist trading partners give them chronic trade deficits, that the budget deficits and trade deficits are inextricably linked in that you can't tackle the budget deficits without causing a second dip in the recession unless you move to balance trade at the same time, perhaps through a scaled tariff, and that China is not going to let the United States come out of its slump by buying our exports, because it plans to replace the United States as the dominant power on the world stage.
Altman is definitely a step above Summers. But Obama is going to be very surprised when Altman's austerity measures cause the second dip in the recession. Too bad Obama is not considering anyone competent for chief economic advisor, someone who would attack the trade and budget deficits at the same time. I would recommend Peter Morici or Ralph Gomory.
Disclosure: No positions
