Transition—Things That Bother Me

And Things That Don’t

After this last week of Transition (week two and a half of eleven), I’m glad I took a week off to write about dogs. Several of you told me that you were glad I did too. But I was glad that Obama and his transition team didn’t take the week off. And, I’ll tell you why.

But first I want to tell you some of the things that didn’t bother me this week. I wasn’t bothered by the decision to let Joe Lieberman keep the chair of the Homeland Security committee. While my personal preference would have been him to be appointed as ambassador to Antarctica, the likely dissent of the penguin population notwithstanding, I wasn’t bothered by the decision that was made because it was the solution preferred by the President-elect. I wasn’t bothered by all of the blithering over the blogospheres Right and Left about the possibility of Wife-of-Bill-Hillary-Clinton being named Secretary of State, at least as long as I was not coerced into reading about it.

I wasn’t bothered about that decision or any of the others that have been made-and-announced and those that have been made-but-not-announced because I want Obama to have the people around him that he believes can best help him achieve his objectives as president. I am proud that he doesn’t seem to be surrounding himself with yes-speaking-cronies. As in the case of Lincoln, creating his own “team of rivals” says something about the self-confidence of the President-elect as well as his sense of this Union's dire straits.

As far as I am concerned “dire straits” is not an overstatement; and that brings me to the things that do concern me at this moment of transition. On Wednesday and Thursday, the Standard & Poor’s index of five hundred stocks fell by more than 6 percent, something that hasn’t happened since July 20 and 21, 1933. Floyd Norris, who reported this happy news, added that the panic in the Great Depression was triggered by collapsing commodity prices, prices that have fallen rapidly this week.

Since I had been already thinking about FDR’s transition in 1932-33, my mood wasn’t helped this morning when Paul Krugman, the Nobel Prize winner in economics and voice that I have come to trust most on the financial crisis, jerked me back in time to that other transition.

Everyone’s talking about a new New Deal, for obvious reasons. In 2008, as in 1932, a long era of Republican political dominance came to an end in the face of an economic and financial crisis that, in voters’ minds, both discredited the G.O.P.’s free-market ideology and undermined its claims of competence. And for those on the progressive side of the political spectrum, these are hopeful times.

There is, however, another and more disturbing parallel between 2008 and 1932 — namely, the emergence of a power vacuum at the height of the crisis. The interregnum of 1932-1933, the long stretch between the election and the actual transfer of power, was disastrous for the U.S. economy, at least in part because the outgoing administration had no credibility, the incoming administration had no authority and the ideological chasm between the two sides was too great to allow concerted action. And the same thing is happening now.

That “disturbing parallel” is disturbing indeed. As Krugman points out, our transition is not quite as long as it was for FDR—he was not inaugurated until March 4—but he also points out that crises move quicker now.

Most obviously, we’re in the midst of the worst stock market crash since the Great Depression: the Standard & Poor’s 500-stock index has now fallen more than 50 percent from its peak. Other indicators are arguably even more disturbing: unemployment claims are surging, manufacturing production is plunging, interest rates on corporate bonds — which reflect investor fears of default — are soaring, which will almost surely lead to a sharp fall in business spending. The prospects for the economy look much grimmer now than they did as little as a week or two ago.

I wonder what FDR would have done about our “Detroit” crisis. When I polled a group of friends (who I suspect all voted for Obama) at lunch last week about bailing out the auto industry, I found no support, about what the three corporate-fly-your-own-plane execs found from the congressional committee when they brought their tin cups to Washington this week. Krugman again gave me pause.

Now, maybe letting the auto companies die is the right decision, even though an auto industry collapse would be a huge blow to an already slumping economy. But it’s a decision that should be taken carefully, with full consideration of the costs and benefits — not a decision taken by default, because of a political standoff between Democrats who want Mr. Paulson to use some of that $700 billion and a lame-duck administration that’s trying to force Congress to divert funds from a fuel-efficiency program instead.

What Krugman is saying is similar to what I heard the President-elect on his interview on “60 Minutes” last Sunday evening:

...let's see how this thing plays itself out. For the auto industry to completely collapse would be a disaster in this kind of environment, not just for individual families but the repercussions across the economy would be dire. So it's my belief that we need to provide assistance to the auto industry. But I think that it can't be a blank check.

At the risk of repeating myself, I think we need to follow Obama’s lead on this matter in order not to make a terrible situation more difficult for him. With Congress about to go into a recess that in other election years would last until January, I thought the Democratic leadership in the House and Senate hit the right notes with their “send us your plans and we’ll consider a special session beginning December 8.” I don’t know what more they could do. Why the automakers didn’t come with detailed plans in hand is another question.

There are a couple of other things that bother me in this transition—two wars, for example. Since we have only one president at a time and Obama is not yet it, all the President-elect can do is to prepare for what his administration will do after January 20. I don’t know what that means in the case of Robert Gates who looks to be asked to continue to remain as Secretary of Defense. In a unique way, he will have two masters in this transition. How can he prepare for what Obama will want him to do after January 20 and do what Bush wants him to do in the meantime? I have a lot of respect for Gates, but this will surely complicate transition planning on Iraq and Afghanistan for Obama.

The Gates situation is there for any to recognize. Obama wants him in the Cabinet; he’ll figure out how to manage it. There is a different problem that is not so visible; and it is truly Rovian. Did you see the article in Tuesday’s Washington Post about how the Bush administration is moving to protect key political appointments in the federal agencies?

Just weeks before leaving office, the Interior Department's top lawyer has shifted half a dozen key deputies -- including two former political appointees who have been involved in controversial environmental decisions -- into senior civil service posts.

The transfer of political appointees into permanent federal positions, called "burrowing" by career officials, creates security for those employees, and at least initially will deprive the incoming Obama administration of the chance to install its preferred appointees in some key jobs.

Similar efforts are taking place at other agencies. Two political hires at the Labor Department have already secured career posts there, and one at the Department of Housing and Urban Development is trying to make the switch.

My Republican friends may argue that this is a practice of every outgoing administration, but they would be wrong, at least in gargantuan degrees. I have argued elsewhere that one of the critical problems a new administration will face is restoring integrity to federal agencies. After re-election in 2004, President Bush set about to politicize federal agencies in a way that had not been attempted since President Nixon after his re-election in 1972. Under Rove’s direction the administration was far more successful than Nixon in enforcing control over the agencies. The Bush administration is doing all it can to extend its influence through what will be “moles” (and I don’t mean the small insectivorous mammals of the family Talpidae) in the agencies. Although the action is completely in character for what we’ve come to expect of the Bush administration, it still bothers me.

A friend and I were talking about FDR in the thirties and the situation Obama now faces. My friend said he thought Obama will know what to do. What worries him is whether or not the American people will accept what is required to save the nation. I think he is right to worry about that. What's bothering you in this time of transition?

- Milo