How Larry Summers hobbled Obama’s economic policy
I love myself a brutal takedown, and Jason Linkins’s evisceration of Peter Baker’s big NYT Magazine story on Obama’s economic policy is a classic of the genre. Except, I have to admit to being Team Baker on this one. We’ve all read a lot of stories about the economy, and what bad shape it’s in, and how we got to this sorry place. This one’s different. It’s written by the NYT’s White House correspondent, and it raises an uncomfortable question: what if part of the problem is that Obama’s economic team just wasn’t a good team? What if, in fact, it turns out to have been a very bad team?
Baker points out that most of the original members of Obama’s economic team have left, and that the new guys are generally Clinton-era veterans. And given the reputation of the two presidents, you’d expect the Clinton bunch to be more fractious and chaotic than the No Drama Obama crew. But that turns out not to be the case:
The path from crisis to anemic recovery was marked by turmoil inside the White House. The economic team fractured repeatedly over philosophy (should jobs or deficits take priority?) and personality (who got to attend which meetings?), resulting in feuds that ultimately helped break it apart. The process felt like a treadmill, as one former official put it, with proposals sometimes debated for months before decisions were reached. The word commonly used by those involved is “dysfunctional,” and in recent months, most of the initial team has left or made plans to leave, including Larry Summers, Christina Romer, Peter Orszag, Rahm Emanuel and Paul Volcker.
Most of the blame here can and should be laid at the feet of Larry Summers — and, implictly, on Obama for hiring him in the first place. Summers is no manager, and seems to have been much better at getting into fights with people than at making sure everybody was doing their best to pull in the same direction. Baker rehearses the stories of Summers’s fights with Austan Goolsbee, with Christie Romer, and with Rahm Emanuel:
Summers and Emanuel also clashed over incentives for small business — the chief of staff kept demanding a proposal, but Summers opposed the idea of using TARP money for the initiative, arguing it would not be effective. It took months to develop a policy.
Baker even comes close to saying that Peter Orszag’s decision to take Citigroup’s millions was in part a function of his inability to get Summers to care about the budget — or, conversely, of Summers’s inability to credibly pretend to Orszag that he was being listened to:
One reason Orszag left, eventually winding up at Citigroup, was the sense that the administration was trapped in a dynamic that would make it hard to reduce the deficit adequately.
All this talk about being trapped in a dysfunctional team, of “picking through the wreckage of a messy divorce”, makes some sense, given the utter inability of Obama or anybody else to articulate a coherent vision of what the Obama administration’s economic policy actually is. Obama, writes Baker,
couldn’t seem to decide whether he was going to take Wall Street to task for its irresponsible behavior or cajole it into freeing up money to get the economy moving. One day he derided “fat-cat bankers” who caused the recession; another day, he soothed them by saying that he and the American people “don’t begrudge” multimillion-dollar bonuses.
Which is weird, given the clarity with which Obama was speaking before his economic team had the opportunity to fall apart.
Summers, of course, is being as slippery as ever:
As we talked for three hours that night, he struck me as thoughtful and analytical about what went right and what didn’t. He didn’t want to be quoted from that conversation, though, preferring to polish his thoughts with academic precision and e-mail them to me later. “We always believed that the greatest risk was doing too little, not to do too much,” he wrote. “We fought for the largest fiscal program we could get.”
Except, of course, that simply isn’t true:
Obama’s instinct was to take on everything at once. “I want to pull the band-aid off quickly, not delay the pain,” a senior Obama official remembers him saying. “He didn’t want to muddle through it, Japan-style,” recalled Larry Summers, tapped to be director of Obama’s National Economic Council. Romer calculated how much government spending would be needed to fill the gaping hole of consumer demand and came up with $1.2 trillion, the highest of three options. Summers told her to leave that number out of the memorandum to Obama.
At this point, the risk is that it’s too late to fix things. Obama no longer controls the House; neither can he count on 60 votes in the Senate for anything. And on top of that, he’s already two years into his administration. For Ken Rogoff, the course is set:
After two years, he said, the president has essentially done everything he can and must wait to see if it works. “What’s going to happen with unemployment and the economy is largely set at this point,” he said. “He’s taken his decisions, and now it will unfold and things will begin to improve.”
The problem is that the improvement will come fast for capital, and very slowly for labor; it’s unthinkable that Obama will run for re-election with a lower unemployment rate than when he ran for president.
The NYT is pairing Baker’s story with a group of photographs by Alec Soth entitled “Portraits From a Job-Starved City”. Linkins is right that these people don’t much care about technocratic squabbles inside the Beltway. But they elected a pro-labor, pro-union president — and got from him an economic policy which recapitalized banks and did wonders for the stock market, but which has massively underperformed on the job and foreclosure fronts. The buck stops with the president: he’s already taken his electoral lumps, and will face tough questions in 2012. But Baker makes an important case that a lot of the blame should be shouldered by Larry Summers, who should have cared much more about unemployment than he did, and who was in large part responsible for the incoherence of the most important arm of the Obama administration.