Comments on: How Larry Summers hobbled Obama’s economic policy A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: Sally32 Thu, 20 Jan 2011 23:41:07 +0000 Thanks for the update and information on Larry Summers Felix. There is not much news on him in the UK and until now all I had seen was a rather fawning and obsequious profile from the BBC’s economics editor Stephanie Flanders. That effort does not seem very accurate now. In fact it seems poor.

By: Dollared Thu, 20 Jan 2011 23:11:01 +0000 Robert, I’ll first start by saying thanks for contributing, and thanks for contributing under your own name (which, in full disclosure, I don’t do because some of my clients are right wingers and I want my kids to have their choice of public or private college).

Baker’s article is lame, but the point remains that Larry Summers was in charge of giving Barack Obama economic advice, and with that advice Obama did a mediocre job of handling the economy. Regardless of the size of the stimulus, the way-too-lenient handling of the bankers, the cynical joke that was HAMP, and the composition of the stimulus (ineffective tax cuts vs. real stimulus) can all be laid at Obama’s feet.

Moreover, almost all of Obama’s errors (except small biz tax cuts) can not only be laid at Summers’ feet for his poor grasp of the politics of coddling Wall Street, his insensitivity to the needs of the mere laboring-and-mortgage-paying-classes, and his total misjudgment about the scale of the employment crisis, they also support two theses that have long followed Summers: 1) that he is bought and paid for by Wall Street and 2) he doesn’t care about the core demographic of the Democratic Party, the vast American middle.

Baker’s article is not great – but it resonates because it makes sense to people that poor policy and poor process go together. And ultimately, how unfair is the overall critique of Summers? If Summers didn’t support Obama’s series of economic policy mistakes, he could have left at any time.

By: robertwaldmann Thu, 20 Jan 2011 18:48:41 +0000 I also find the criticism of Larry Summers unconvincing. I must note at the outset that Larry Summers was my PhD supervisor and I owe him a lot.

I don’t understand your criticism of Larry Summers. From the quoted bits of the article, he is blamed for not caring enough about the deficit and for not adding enough to the deficit with the stimulus bill. That is Baker criticizes him for disagreeing with Orszag who wanted to focus more on the deficit. Do you think that the Obama administration pivoted too late from trying to stimulate to trying to cut the deficit ? If so, your first criticism of Summers makes some sense. Otherwise it makes no sense at all.

He is also criticized for delaying the small business assistance bill which has done so much for the economy since it passed as is shown by … what exactly ? What evidence is there that Emanuel was right and Summers wrong on that one. I think that Emanuel liked the words “small business” and didn’t know or care about the effect of different policies on GDP or employment.

Importantly, the debate as described by Baker is over use of TARP money. You don’t mention if any alternative use was considered.

In the your quotes of Baker, I think we see the faults of US political journalism. The content of policy is ignored. The issue is whether people work together smoothly or there is conflict. This is the sort of idiocy that made many journalists assert that the Bush administration was highly competent. The meetings started and ended on time and everyone was on the same page. There were few (or no) unauthorised leaks. Everyone stayed on message. It’s a pity the policy choices were terrible, but it would be improper for reporters to consider that.

I am surprised that you agree with Baker. You too are a journalist, but you know a lot of economics. Surely you agree that the decision about which is the worse problem unemployment or the deficit is more important than whether Orszag’s feelings are hurt.

By: robertwaldmann Thu, 20 Jan 2011 18:32:36 +0000 I know that Barack Obama said that Lloyd Blankfein invented the internet, but the claim “he soothed them by saying that he and the American people “don’t begrudge” multimillion-dollar bonuses.” is false. Since it is a false claim about a published transcript, the false claim published in the New York Times demonstrates reckless disregard for the truth.

I quote the context of the two words TWO Words ! which Baker ripped out of context.

“Q Let’s talk bonuses for a minute: Lloyd Blankfein, $9 million; Jamie Dimon, $17 million. Now, granted, those were in stock and less than what some had expected. But are those numbers okay?

THE PRESIDENT: Well, look, first of all, I know both those guys. They’re very savvy businessmen. And I, like most of the American people, don’t begrudge people success or wealth. That’s part of the free market system. I do think that the compensation packages that we’ve seen over the last decade at least have not matched up always to performance. I think that shareholders oftentimes have not had any significant say in the pay structures for CEOs.”

So Obama said that the US people don’t begrudge success or wealth as such, however, wealth based on Wall Street compenstation packages have no justification.

Just to make it absolutely clear that Baker libeled Obama, I will also report the follow up question and answer

“Q Seventeen million dollars is a lot for Main Street to stomach.

THE PRESIDENT: Listen, $17 million is an extraordinary amount of money. Of course, there are some baseball players who are making more than that who don’t get to the World Series either. So I’m shocked by that as well. I guess the main principle we want to promote is a simple principle of “say on pay,” that shareholders have a chance to actually scrutinize what CEOs are getting paid. And I think that serves as a restraint and helps align performance with pay. The other thing we do think is the more that pay comes in the form of stock that requires proven performance over a certain period of time as opposed to quarterly earnings is a fairer way of measuring CEOs’ success and ultimately will make the performance of American businesses better.”

So in exactly the interview which Baker falsely asserts shows Obama soothing Wall Street executives, he advocated regulation of compensation which were not approved by Congress.

The claim about Obama is exactly as valid as the claim that “Al Gore claimed he invented the internet.”

You are, among other things, a journalist. You should be ashamed to repeat libels which have become conventional wisdom.

By: inboulder Thu, 20 Jan 2011 16:56:53 +0000 It seems rather naive to think that the White House ‘caring more’ about unemployment would have significantly affected it.

By: klhoughton Thu, 20 Jan 2011 16:26:58 +0000 You seem to be ignoring several salient facts, not the least of which being that Orszag was (and is) wrong with his “deficits take priority” view. Summers, who lived through the Peso Crisis (and had a strong leader then, unlike now), knows full well the value of Demand.

Obama has said–why does no one except me point this out every time the point is raised–that it was his mistake to, essentially, start with his BATNA and negotiate from there.

You can blame Larry Summers for a lot of things (and I do), but you can’t blame him for following the leadership he was (not) given.

And as for the “who got to attend which meetings?” shibboleth, the nicest thing we can say is that a writer who thinks that’s a question of “personality” is not a writer who understands the subject about which he is writing.

Baker is just not up to the task; that his conceits are wrong given the nature of the problem is lagniappe.

By: ErnieD Thu, 20 Jan 2011 16:12:52 +0000 I think it is becoming clear that the two key economic needs for the United States are increased energy independence (with less corn ethanol) and increased manufacturing. These would reduce for the foreign trade deficit dramatically and provide employment.

Unfortunately, Clinton, Bush, and Obama have all put in place economic teams dedicated to increasing the wealth of the financial sector, protecting vested interests in energy production and usage, and moving manufacturing offshore. These sectors have also effectively purchased Congress.

We need a massive reboot of economic thinking in government. Unfortunately, I think that the vested interests have bought so much influence that it will take a true crash and depression to break their lockhold on economic policy in this country. But I have faith that, at some point in time, conditions will get to the point where it will be possible to put something systemic in place on the order of the anti-trust legislations and Glass-Steagal Act that were put in place in the first half of the 20th century in the wake of massive collapses.

Folks like Summers, Geithner, Bernanke, Greenspan, Paulson, and Rubin are all just flag-wavers and cheerleaders for the currented vested interests. Nothing will change until they are thoroughly discredited publicly.

By: uprof Thu, 20 Jan 2011 05:37:25 +0000 Summers ‘should have cared much more about unemployment than he did.’ With a lot more caring, things would have turned out better? QED?

By: LadyGodiva Thu, 20 Jan 2011 01:28:37 +0000 That’s twice today that you’ve pointed me to wonderful, quirky pieces, Felix. Thanks.

I loved the Rockford portraits. It’s like having Walker Evans’ photos speak. Do they care that Larry Summers screwed them over in favor of GS and Morgan Stanley? They would if they knew.