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Obama's cabinet
Article added on January 1st, 2009
So far, the slogans of Hope and change have translated into a rather centrist cabinet. On paper at least, it looks relatively moderate. President-elect Obama even intends to keep Bush's secretary of defense, Robert Gates. Some may remember Obama's initial plan for Iraq: no surge, instead an early withdrawal, which would have meant an American defeat and probably chaos and civil war in Iraq. One has to concede that Obama is able to learn from his mistakes. Let's hope that, once in office as the 44th President of the United States of America, he won't make strategic errors of the same disastrous magnitude.

President Obama's other bold choice was to appoint Hillary Clinton as America's next secretary of state. Obama the candidate made several serious gaffes traveling abroad, e.g. in Israel he told the Israeli that Jerusalem should remain an undivided Israeli city. He probably wanted to make people forget that before he had positioned himself as a strong advocate of the Palestinian cause.

As so often, Obama tells a specific crowd what they want to hear. Only a minority has recognized his attitude as opportunistic. Therefore, he got away with it. Once no longer president-elect but president, he will have to take decisions which won't please everyone. We will soon find out whether he is an able decider.

One thing is for sure, Hillary Clinton is the better foreign policy expert than Barack Obama. She is a heavyweight and may well have an impact on the international scene.

Barack Obama had to reward Hillary Clinton because she campaigned for him more than most primary losers in the past. Even with a disastrous Bush presidency and the looming financial crisis, without the help of women voters backing Clinton, Obama would not have made it into the White House. After weeks of self-denial, Hillary Clinton realized that it was best for the Democratic Party and, last but not least, for her own political future, to stand firmly behind candidate Obama.

She is now a prominent member of Obama's cabinet. To appoint her as the next
“health care Tsar” would probably have been the wiser decision. Since her husband's first cabinet, her name is strongly associated with health care reform. She could not have turned down such a position. But because she miserably failed under her husband's presidency may be the reason why Obama decided not to appoint her to push through a substantial health care reform. Tom Daschle, the incoming secretary of health and human services, has strong credentials in that field. The problem is just that the Democrats risk to implement a system to heavily relying on the state, creating a black hole for taxpayers money.

Several reasons could make Hillary Clinton's appointment as secretary of state a bad choice. Bill's foreign policy record is disastrous. Bosnia, Somalia, Rwanda, Iraq, North Korea and Pakistan are just a few of his foreign policy disasters. Hillary is not Bill, but she has not distanced herself from past errors. On the contrary, she presents the “Clinton legacy” as a part of her credentials. Let's hope that like Obama she is able to change.

More dangerously for President Obama, in most countries ministers of foreign affairs are the most popular members of cabinet. They normally don't have to take unpopular decisions such as to increase taxes. They can be seen on television shaking hands with world leaders all the time. In a worst case scenario, she could rise in popular opinion to the point to become a dangerous rival for Obama in four years. So far, she has presented herself as a team player and as such could on the contrary strengthen President Obama's stature.

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Obama's top priority will be the economy. Luckily, he picked Lawrence Summers, a former treasury secretary, to head the White House National Economic Council. Summers said that it would be a mistake to spend government money solely to stimulate consumer spending. Obama's $1 trillion stimulus plan could otherwise just mean $1 trillion lost on behalf of America's taxpayers, $1 trillion more in debt, as previous Japanese stimulus plans have shown.

Timothy Geithner as president-elect Obama's choice to be the next secretary of the treasury seems reasonable too. As president of the New York Federal Reserve Bank, Geithner is well respected in the financial sector and beyond. He supported the decision to let Lehman Brothers fail. In retrospect, this has increased the crisis. Still, in a few years, the current crisis may be remembered as a healthy thing. Without the cleaning up, another crisis in the future would have been even worse. Geithner should learn the lesson and split up giant banks such as Citigroup.

There is no capitalism without capital and a well-functioning banking system. Oligopolies, cartels and other limitations of market forces have to be prevented; Ordoliberals such as Röpke, Erhard and others advocated this in Germany after World War Two.

Since the financial system is the backbone of any economy, oversight is key. In addition, the principle of “small is beautiful” should be applied. The world does not need gigantic banks. Split them up into smaller entities and limit their maximum overall market share. No bank should be too big to fail in the future; in 2008, Germany has just taken steps in the wrong direction by allowing the fusion of two of its largest banks. Furthermore, bankers should be liable with their personal wealth if they violate basic rules of due diligence, as has happened in the past by selling junk mortgages as secure securities.

Less convincing is Obama's statement that his stimulus plan will create three million new jobs over the next two years. This sounds too much like big government.

Let's hope that Bill Richardson as secretary of commerce will fully embrace free trade and that Obama's anti-NAFTA and anti-free-trade rhetoric will remain just... rhetoric.

Another dangerous idea is the vision that you can bail yourself out of the financial and economic crisis. If the Detroit automakers have such a bright future with a cash infusion, there will be investors out there eager to lend them money. Otherwise, let them go down. New investors will show up, buy the companies and hire parts of the workforce to new, sustainable conditions.

Mary Schapiro as the new boss of the SEC will have a key position in order to ensure the proper functioning of the financial system. As far as we now by now, the SEC seems to have failed in the past.

As for the mortgage and financial sector, my advice: split up Fannie Mae and Freddie Mac into 1000 companies. A $5 billion mortgage company still is big business. If one out of a thousand fails, it won't endanger the entire system. The other half of the mortgage market, another $5000 billion, should be split into another 1000 companies too. The Federal Government should limit the market share of mortgage companies, e.g. to 0.5% nationwide and to 5% statewide.

Barack Obama appointed Tom Vilsack as secretary of agriculture. He is unlikely to do what should have been done many years ago: eliminate all subsidies to farmers and the agricultural sector. The new president should make a “blood, toil, tears and sweat” speech. He should not cut down the overall budget, but cut it where needed.

At the same time, he could announce a multi-billion dollar project to do the fundamental research - made available to all companies interested -  to reach energy independence thanks to solar and other clean sources of energy within the next ten to twenty years.

Eric Holder jr. as the new attorney general is unlikely to repeat the mistakes of the secretaries Ashcroft and Gonzalez who were instrumental in re-establishing torture.

So far, Obama's cabinet looks reasonable, more moderate than could be expected. Let's give the new president and his government a year or two to show that they can govern efficiently. Worse than Bush the Torturer, that will be difficult to achieve. For the moment, we still have hope for change towards the better.

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Added on January 5, 2009:
Bill Richardson won't serve as Obama's secretary of commerce. The statement by Bill Richardson:
For nearly three decades, I have been honored to serve my state and our nation in Congress, at the U.N., as Secretary of Energy and as governor. So when the President-elect asked me to serve as Secretary of Commerce, I felt a duty to answer the call.I felt that duty particularly because America is facing such extraordinary economic challenges. The Department of Commerce must play an important role in solving them by helping to grow the new jobs and businesses America so badly needs.

It is also because of that sense of urgency about the work of the Commerce Department that I have asked the President-elect not to move forward with my nomination at this time.I do so with great sorrow. But a pending investigation of a company that has done business with New Mexico state government promises to extend for several weeks or, perhaps, even months.

Let me say unequivocally that I and my Administration have acted properly in all matters and that this investigation will bear out that fact. But I have concluded that the ongoing investigation also would have forced an untenable delay in the confirmation process.Given the gravity of the economic situation the nation is facing, I could not in good conscience ask the President-elect and his Administration to delay for one day the important work that needs to be done.

So, for now, I will remain in the job I love, Governor of New Mexico, and will continue to work every day, with Lieutenant Governor Diane Denish, to make a positive difference in the lives of New Mexicans. I believe she will be a terrific governor in the future.I appreciate the confidence President-elect Obama has shown in me, and value our friendship and working partnership. I told him that I am eager to serve in the future in any way he deems useful. And like all Americans, I pray for his success and the success of our beloved country.

The statement by president-elect Barack Obama: “It
is with deep regret that I accept Governor Bill Richardson's decision to withdraw his name for nomination as the next Secretary of Commerce.Governor Richardson is an outstanding public servant and would have brought to the job of Commerce Secretary and our economic team great insights accumulated through an extraordinary career in federal and state office. It is a measure of his willingness to put the nation first that he has removed himself as a candidate for the Cabinet in order to avoid any delay in filling this important economic post at this critical time. Although we must move quickly to fill the void left by Governor Richardson's decision, I look forward to his future service to our country and in my administration.”

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© Copyright  Louis Gerber  All rights reserved.