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E.J. Dionne on President-elect Obama’s first cabinet appointments

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HH: Joining me from Washington, D.C. now, Washington Post columnist E.J. Dionne. E.J., welcome back, Happy Thanksgiving in advance to you.

EJD: And Happy Thanksgiving to you. I got to meet your college roommate, whom we both like very much, and I learned that you had been president of the Young Republicans at Harvard.

HH: That’s correct.

EJD: And I admired you all the more because that took a lot of courage. So I appreciate that.

HH: Not in those days. We could gather in one room, and so it was not really that exciting in 1978 to be the president of the College Republicans, but yeah, I’m glad you ran into Gearan. I don’t know where Gearan was. Was he down in D.C.?

EJD: Down in D.C. It was a group of college presidents getting together.

HH: Yeah, I wouldn’t be surprised to see Mark show up in the Obama administration, because everybody else from the Clinton administration is showing up in the Obama administration.

EJD: He’d be a good one. Actually, if he picks the best of the Clinton administration, he wouldn’t do so badly.

HH: Now let me ask you, E.J. I called you today because I read your column as I always do in the Washington Post this morning called “Obama’s Brain Trust,” and I agreed with it. So I thought I had to call on this rare occasion of completely agreeing with E.J. I am very, very cheered as a conservative free marketeer by the four big picks – Tim Geithner at Treasury, Larry Summers at the White House, Christina Romer as the head of the Council of Economic Advisors, and Peter Orszag as the OMB director. I just wanted to check, I think they’re great picks, probably the best that could be hoped for from a conservative. What’s an old-line liberal like you think about this?

EJD: Well first of all, I like the headline on your column so much, “E.J.’s Right,” that I sent the link to my wife with a subject line, won’t see this too often. So thank you very much. You know, my view of this, the one line in your blog which I much appreciated that I disagreed with was that he is talking left and governing right. I think that what you’re seeing here is someone who is broadly progressive, or if you will, liberal, in the sense that he really does care about income and equality. He wants more equity in the economy. But he’s a pragmatist. He wants smart people to get things done. Anyone who actually thought that Obama was a socialist in the sense that he wanted to get rid of the free market I think misunderstood him. I think he believes in the market, but believes in a tempered market. And I think all these guys send a signal to conservatives and people who operate in the market that yes, he’s going to be friendly to markets. But I think when you look at people like Orszag, Peter Orszag or Larry Summers, for that matter, these are people who also care about inequality. I think you can have those two positions at the same time.

HH: It’s a question of at what level does taxation and regulation kill productivity? And along that Democratic Party spectrum, E.J. Dionne, obviously there are some who are less concerned with that delicate balance than those he has brought in. Is that a fair assessment of it?

EJD: Well see, I think that most liberals, if I can speak for liberals, are as aware as you are that 90% taxation levels do have some impact on productivity and effort and all of that. What we’re talking about, what we’ve been arguing about, are differences between top rate of, say, if you add in everything, 41% versus 30-something percent. Nobody’s talking about confiscatory taxation. So if you’re asking should people who are friendly to markets be happy with these appointments, the answer is you’re right. Yes, I think they should be broadly happy with these appointments. But I think that most liberals are, you know, accept the market, and they just don’t deify the market. And Lord knows, given what’s happened in the last six months, deifying the market is a great mistake, although theologically, you would oppose deifying anything except God Himself.

HH: But let me ask you in terms of the 41%. Does that include, for example, Obama’s, the President-elect, and I’m training myself to say it that way, because I always used to object when the let would refer to Bush as Bush.

EJD: You know, by the way, I want you to know, and you may find one where I was, I so objected when the right did that to Clinton that I believe that every first reference to President Bush in my column was to President Bush, no matter what I wrote about him.

HH: And that’s the appropriate way.

EJD: Thank you for doing that.

HH: Yeah, that’s the appropriate way. But when the President-elect was campaigning, he talked about raising Social Security taxes on every dollar over $250…now I’m not sure if he meant couple, individual, whatever. But you know, that takes your marginal rate of 41% immediately north of 50, and then you add in a California or a New York tax, E.J. Dionne, and suddenly you’re into that land where productivity crumbles, aren’t you?

EJD: Well, I don’t know about crumbles, but that’s getting to be a pretty high rate. And we’ll see what he does on Social Security. There’s also the question of what you do with taxation of dividends and taxation of capital gains, and that he has committed to a slightly higher rate of capital gains, although I honestly don’t think you’re going to see that in the next couple of years given the economic mess. I think the other thing that might have cheered you yesterday is when he didn’t flatly say I’m going to repeal the Bush tax cuts for the well off immediately. He seemed to leave open the possibility that he’d let them expire later on.

HH: And generally speaking, your friends on the left, they don’t like this, do they?

EJD: Well they don’t, although I think to be honest, most people in the middle of a downturn like this, which is so dangerous, I think most of my friends, and probably me included, could accept the idea that you would delay that in order to make sure the economy gets back.

HH: Do you also, as the New York Times speculated today, delay cap and trade, E.J., in order to make sure that we do not add an unknown burden to a very fragile economy?

EJD: Well, I think that may happen to some degree anyway, or that it would be phased in slowly. I think that what he’s suggesting is that, and Al Gore has been big on this, is that you can use some of this stimulus package to make green investments, which while you might oppose them as part of big government spending, might actually be constructive for us in the long term, and do that in the front end, so you could begin to get a handle on carbon emissions now. And I don’t know how you sort of would, if you would phase in cap and trade more slowly at the outset. I think that’s possible.

HH: Now what about, in your opinion, a GM, Ford and Chrysler assistance package, and how would you see it framed with this economic team, and the President-elect’s ties to the UAW?

EJD: Well, I think he framed it pretty well yesterday, that to have the entire traditional American part of the auto industry, because obviously Toyota and others do build cars here, but to have that whole part of the industry go into bankruptcy would create even greater problems now given the downturn than it would in flush times, number one. And number two, I do believe in defending decent paying jobs, so that I think there will be a bailout, but I was astonished, as everyone else was, at what a terrible job these auto executives did in trying to sell it the first time. I mean, why don’t they carpool in a GM-made car and drive here for one thing. But I think you will get some kind of bailout eventually, if these guys aren’t totally ham-handed about it.

HH: Now my suggestion in this regard is to somehow shift the burden of the retirees of the UAW over to the federal government. In other words, treat them as though they had retired from the federal government, provide them with the same health and benefits if they’d been federal retirees, and thus take that burden off the automakers. But if they can’t make it go that way, E.J. Dionne, can they ever make it go? If you get rid…and that’s the big burden, is that they’re paying the benefits for 500,000 retired UAW workers. If they can’t make it relieved of that, there’s a possibility they’re just outdated, isn’t there?

EJD: Hugh, if I were a right winger, I’d say that’s the thin edge of the wedge for socialized medicine, isn’t it, because you’re basically proposing to socialize those costs. I don’t think that’s a terrible idea at all, by the way.

HH: Well, I ran…

EJD: …which might give you second thoughts about it.

HH: No, I ran the FEHB for a few years at OPM, and the FEHB is socialized medicine…

EJD: Right…

HH: …which is way expensive, but at least it’s a declining cost, not a fixed cost, and it takes away all excuses GM, Chrysler and Ford would have as to why they’re failing. And that’s what I’m getting to. Is it possible in the minds of liberals that the problem might not be other than structural inability to innovate in the American car business?

EJD: No, but that is a big question. I mean, there’s a reason why even though I drive a Saturn, there’s a reason why these cars haven’t sold. I don’t think even the most committed friend of the UAW, and I consider myself friendly to the UAW, thinks that the American car industry has made great choices consistently over the last ten or fifteen years. And everybody is talking about if they get any kind of federal aid, they need to retool. Obama would like to give it a green sort of fill up by saying let’s move them into the next generation of cars. But I don’t think anybody disputes that the American auto industry has made some big mistakes.

HH: All right, last question, E.J. Robert Gates, according to Politico’s Mike Allen, a friend of yours, is going to be retained by the President-elect. I love that decision. He’s the architect of the surge along with George Bush and the innovator, David Petraeus. But again, this is a recognition that W. has been doing the right thing for the last two years, isn’t it? And what do you think of this?

EJD: The…I am mixed on it, to tell you the truth. I’m mixed on it in the sense that having Gates in there gives him an enormous power to resign at some point in protest if he wants to, which could create damage down the road. On the other hand, he doesn’t seem like the sort of person who would do that. But if you want to withdraw from Iraq, who better than to bless Barack Obama’s withdrawal plan than Mr. Gates. And so I think in the end, it’s a shrewd move in that people who do favor a withdrawal from Iraq might look at it as a shrewd way to pull of a withdrawal.

HH: E.J. Dionne, always a pleasure, have a wonderful Thanksgiving, and I Look forward to talking to you between now and Christmas.

EJD: I hope so. Thanks so much.

HH: Thanks, E.J.

End of interview.


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