CHICAGO – President-elect Barack Obama chose former Federal Reserve Chairman Paul Volcker Wednesday to head a new White House panel to help create jobs and bring stability to the ailing financial system.
Volcker is no stranger to economic crises. He became Fed chairman in 1979, a time of high inflation and high unemployment. He helped tame inflation by raising interest rates, a move that helped plunge the economy into recession. He was later credited with reviving the economy by getting inflation under control. Volcker served as Fed chairman until 1987.
He returns as an adviser with the nation facing increasing unemployment, a growing federal budget deficit and a financial system in turmoil.
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CHICAGO (AP) — Former Federal Reserve chairman Paul Volcker will head a new White House panel to help President-elect Barack Obama create jobs and bring stability to the ailing financial system.
Volcker, 81, will head the President's Economic Recovery Advisory Board. The board's top staff official will be Austan Goolsbee, a University of Chicago economist, Obama's office said Wednesday.
Former President Jimmy Carter named Volcker Fed chairman in 1979, a time of high inflation and high unemployment. Volcker helped tame inflation by raising interest rates, despite intense opposition by some in Congress. Volcker's moves helped plunge the economy into recession in the short-term, but he was later credited with reviving the economy by getting inflation under control. Volcker served as Fed chairman until 1987.
Obama was expected to introduce members of the advisory board Wednesday at a news conference, his third in as many days as the long Thanksgiving weekend nears. It was a remarkable burst of public activity for Obama, who has sought to assure nervous consumers and financial markets that he will bring swift economic relief as president.
Tuesday, Obama introduced Congressional Budget Office Director Peter Orszag as his candidate to run the White House Office of Management and Budget. The president-elect also pledged a "page-by-page, line-by-line" budget review to root out unneeded spending.
His economic team largely complete, Obama was expected next week to introduce national security officials, including Hillary Rodham Clinton as his secretary of state. Aides said the New York senator had not yet formally accepted the offer, but transition officials have indicated the nomination is on track.
Obama also was expected to announce he had asked Defense Secretary Robert Gates to remain at the Pentagon for a year. James Jones, a former Marine Corps commandant and NATO commander, was Obama's pick to be national security adviser.
At his news conference Tuesday, Obama set no goals for reducing the federal deficit — now in record territory and headed ever higher. On Monday, he announced plans for a massive economic stimulus plan that Democrats have said could cost as much as $700 billion.
On Wednesday, British Prime Minister Gordon Brown said his country will host an April 2 meeting of the Group of 20 industrialized and emerging economies to discuss the financial crisis. Brown told lawmakers in London that Obama has said he will attend the talks.
With his Electoral College landslide victory, Obama said Tuesday he possesses a "mandate to move the country in a new direction, and not continue the same old practices that have gotten us into the fix we're in."
At the same time, the Democratic president-elect pledged to consult with Republicans and approach his administration with humility "and a recognition that wisdom is not the monopoly of any one party."
Obama's promise to be careful with a federal buck was placed in a larger context.
"As soon as the recovery is well under way, we need to set up a long-term plan to reduce the structural deficit and make sure we are not leaving a mountain of debt for the next generation," he said.
The picture took on troubling new dimensions a few hours before he spoke when the Commerce Department reported economic activity declined at a rate of 0.5 percent in the three months ending in September.
Further underscoring weakness, Americans' disposable income fell at an annual rate of 9.2 percent in the same period, the largest drop in records that date to 1947.
And The Washington Post reported Wednesday that the number of Americans using food stamps to buy groceries was expected to pass 30 million this month, a new record.
The federal budget deficit was a record $455 billion for the fiscal year that ended Sept. 30, and is certain to be higher this year — possibly reaching $1 trillion — as the costs of a financial bailout and an economic stimulus package are piled on top of smaller-than-expected tax receipts.
Against that backdrop, Obama said: "Budget reform is not an option. It is an imperative. We cannot sustain a system that bleeds billions of taxpayer dollars on programs that have outlived their usefulness, or exist solely because of the power of a politician, lobbyist or interest group."
As an example, he cited a report that from 2003 to 2006, millionaire farmers received a total of $49 million in crop subsidies that they may not have been entitled to.
"If this is true, it is a prime example of the kind of waste I intend to end as president."
To serve both his objectives of growth and careful spending, Obama said he hoped some of the funds spent to stimulate the economy could also lay the groundwork for longer-term economic health.
As an example, he said, "a smart job of investing in health care modernization" could help in both the short term and the longer run.