Department of Follow-Up Dept.

by Marion Maneker

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As the election closes out amid the wet squelch of the economy, it’s worth looking forward toward the Obama transition. In the past, I’ve wondered about who would be holding down the fort at Treasury. Jon Heilemann answered that in this week’s New York magazine: “. . . the inside betting is on a Larry Summers encore. ‘They’re gonna want somebody who knows the building, knows the economy, has been confirmed before and been advising them on economics,’ says the former Clinton aide. ‘I’d be flabbergasted if they chose somebody else.'”

But events have moved so quickly, the real question isn’t personnel but policy. With the financial system sort-of stable, there’s going to be a crying need for an economic “iron lung.” Not just the auto industry bailout, which is just as much about pensions as it is about jobs, but a massive effort to rebuild the American economy from the ground up. Here’s where Time’s Joe Klein gives us a few clues: “As Obama told me in our interview, a government-propelled transition to an alternative-energy economy will be his most important initiative. Translated into Washington terms, this means a massive infrastructure and stimulus package — in the neighborhood of $300 billion, according to the current speculation. [ . . . ] The Beltway consensus is that the economic crisis makes it necessary now. But public cynicism about government requires that the next President builds accountability into his spending programs. That’s why the Infrastructure Bank that Obama proposed during the campaign may be crucial: it would create a bipartisan board of five governors who would judge and approve all major projects. In normal times, getting an Infrastructure Bank through Congress would be impossible. “It is a direct threat to their way of life,” says Norman Ornstein of the American Enterprise Institute. “It changes the dynamic of how you deal with earmarks,” by taking the decision-making, and to some extent the credit, away from politicians.’

If that $300 billion number seems out of whack to you, go ask Martin Feldstein. He’s no liberal but he thinks $300b is the number we need to offset the loss in spending from housing. But we can’t spend that money on vacations. So we need a big infrastructure push. In terms of energy freedom, that could come in part from nuclear power. Obama soft pedals nuclear power. But one of McCain’s few talking points that does make sense is his insistence that we build 45 nuclear power plants to create 700,000 jobs. Think of it as a 21st Century Tennessee Valley Authority. (Someone in the campaign has surely found a copy of David Lilienthal’s journals on Alibris.) So maybe it won’t be 45 plants. They cost something like 11 figures each. But just a few plants would be the kind of infrastructure project that fits with all of Obama’s goals: jobs, energy independence, infrastructure. The boon to the construction trades won’t hurt either.

The big question now is how this all comes together. How does Obama’s economic team of Summers and Warren Buffett and Paul Volcker solve the problem of an economy that’s been hollowed out by the banking system and Wall Street? And can the country–and the world–wait until January for them to unveil a confidence building economic plan that is more effective than Bernanke and Paulson’s confusing and confused financial plan.

The good news is that no one’s going to be sad to see Paulson go. The bad news is that Congress will still be there. Joe Klein pointed out, Obama is going to have to step on a lot of toes to put his ideas into effect. (There’s an obvious joke to be made here about what happened when Summers stepping on toes at Harvard–but I digress.) The silver lining in the Obama campaign is his independence from the Congressional Democrats as Klein points out, even if some people find this worrisome. Moderates and independents are concerned that an Obama landslide will leave the special interests unfettered. Here Heilemann offers something hopeful:

“Sure, he vowed to transform Washington, but he did not run against it. He is surrounded by people—Emanuel, Podesta, former Tom Daschle aide Pete Rouse, and Daschle himself, who stands a reasonable chance of being Obama’s White House chief of staff—steeped in the legislative culture and masters of the legislative arena. [ . . . ] Not that dealing with a pair of institutions led by Nancy Pelosi and Harry Reid will be any kind of picnic. “They’re incredibly weak leaders running a Congress with 12 percent approval ratings,” one Democratic think-tank maven says. “They’re not people with much of a record of, you know, actually getting things done.” [ . . . ] Yet the very feebleness of Reid and Pelosi may work to Obama’s advantage; they are much more likely to see their fates as bound up with his [ . . . ] [T]he unconventional way he ran for office, the whole bottom-up movement thing, may grant him a degree of independence unique in modern history. “Personally, I think the depth of the Obama realignment is being underestimated,” says the Republican media savant Stuart Stevens, who helped elect Bush twice. ‘They have basically invented their own party that is compatible with the Democratic Party but is bigger than the Democratic Party.’”

The tepid campaign and the enormity of the financial crisis have distracted us from the potential size of the party of change that is moving toward Washington. We know very little about the man who leads that party. But it does look like we’re going to find out.