Obama’s selection of Paul Volcker and Austan Goolsbee to head his economic team says it all.

Volcker, Fed chairman under Carter and Reagan, is the architect of modern fiscal policy (“monetarism”) that manipulates interest rates (that is, the supply of money) as a tool to control growth and inflation (vs. the previous policy of targeted interest rates). In the face of stagnant growth and persistent inflation, Volcker ratcheted up interest rates, with the prime ultimately hitting 21.5%. This contributed to the 1981 “Reagan recession”, then the largest economic downturn since the Great Depression. Yes, he “licked inflation” (of which wage growth is a major component) to the delight of Wall Street, but at the cost of millions of jobs.

Goolsbee is a University of Chicago economist. Yes, that “Chicago School”, bastion of libertarian market fundamentalism. Naomi Klein, in The Nation June 12, wrote that Goolsbee is

on the left side of a spectrum that stops at the center-right. Goolsbee, unlike his more Friedmanite colleagues, sees inequality as a problem. His primary solution, however, is more education–a line you can also get from Alan Greenspan. In their hometown, Goolsbee has been eager to link Obama to the Chicago School. “If you look at his platform, at his advisers, at his temperament, the guy’s got a healthy respect for markets,” he told Chicago magazine. “It’s in the ethos of the [University of Chicago], which is something different from saying he is laissez-faire.”

So when Obama talks about creating 2.5 million jobs, one may wonder whether he will attempt to do so by continuing the bipartisan Bush bailout of the greedy corporate sluts who got us into this mess, or if he’ll follow the lead of FDR and invest directly into the creation of jobs.

With Volcker and Goolsbee having his ear, you’ve got to assume he’s not going to start with FDR-style Keynesianism (even if conditions ultimately force that course). Unfortunately, it’s looking like Obama is going to take a detour through modified Hooverism before he gets it right.