Ten Economic Pieces Worth Reading: December 30, 2009
links for 2009-12-31

Obama Economic Team: Exceeds Expectations

I was just about to write a year-end reflection in which I was going to say that the Obama economic policy team had exceeded expectations--a sizeable fiscal stimulus, a second round now moving through the congress, victory in the intellectual war over whether the government should and can stabilize the economy, blocking any protectionist moves, key support for what looks to be a successful (if moderate Republican) health care reform, key support for ongoing climate policy--a solid B+/A-. The major problems are (a) that the macroeconomic situation turned out to be much more dire than we thought last November-December, (b) that financial regulatory reform looks to be a flop--too many members of congress bought by bankers--but IMHO Geithner and company played out a weak hand that Paulson had taken care to leave them, and (c) that the fact that private banks have profited while the government has not from the bailouts means that there is now no more ammunition should things turn south once more.

But still: exceeds expectations. Remember: Clinton's attempt at a stimulus package cratered in the spring of 1993, NAFTA nearly failed in spite of Republican and Democratic leadership support, the 1993 Reconciliation Bill was the narrowest of victories (albeit a very important one)--and that was it for two years.

Yet now I find Duncan Black linking to:

Al Hunt [who] has a rather distressing portrayal of the functioning (or not) of Obama and his econ team...


Obama’s Foreign-Policy Team Bests Economy Stars: Two recent anecdotes illustrate this problem. On Dec. 2... Obama... heard a familiar reprise of the previous several meetings with budget director Peter Orszag arguing for more emphasis on reducing the deficit and Council of Economic Advisers chief Christina Romer leading the contingent espousing a greater short-term stress on jobs. The president, by his standards, exploded. “Why are we having this meeting again, the same discussion,” participants quoted him as saying. Several administration insiders, prominent outside Democratic economic advisers and a few Congressional heavyweights, all worry this is symptomatic of a process that isn’t working well. Summers, they argue, is brilliant on policy and ill-suited for a high-level staff job, which is what the head of the National Economic Council is. “If you came up with 10 words to describe Larry, coordination and collaboration would not be two,[1]” says one person requesting anonymity who has worked with Summers extensively and admires his intellectual force.... Summers too often is dismissive of fellow economic advisers, other than Geithner... he gets a bum rap for supposedly freezing Volcker out....

The other problem, an inability to effectively communicate an economic policy, was typified in a Dec. 4 interview with Geithner, who was asked what is the “clear, coherent economic message.”... He proceeded to talk about “high-class education” for children, affordable health care, better incentives for energy and infrastructure, public-private arrangements and the like.[2] There are 15.4 million unemployed Americans and another 11.5 million “underemployed,” either having given up looking and thus not counted in the jobless numbers or involuntarily relegated to part-time work. A laundry list of the Democrats’ agenda is unlikely to prove comforting. Geithner, who wins praise from Obama and others for his substantive performance... acknowledges that public communications isn’t his forte. It isn’t Summers’ either. And those who are more effective, including Roemer and fellow Council of Economic Advisers member Austan Goolsbee, sometimes are cut out of the action...

So Hunt has three criticisms:

  • Effective communicators like Christie and Austan aren't put out in front enough on the substance and the message.
  • Larry squashes dissent, dismisses the views of others, and doesn't let them get their say.
  • Tim cannot stay on a simple message.

Yet Hunt's article shows only one of these three. His article doesn't show Larry squashing dissent and freezing out others. Instead, it shows him running a process in which Christy Romer and Peter Orszag both make their strong--if opposed--pitches. His article doesn't show Romer and Goolsbee being cut out: Peter Orszag is not in their alone giving the budget briefing. His article does show Tim Geithner getting off message: the message is supposed to be that the administration's policies are all aimed at creating lots of good jobs to make Americans prosperous--and education, affordable health care, investments in efficient energy, infrastructure, public-private partnerships, etc. are all part of that.

Can we at least ask for articles that show, not tell, the defects in policy-making they claim?

The constraints on the Obama Administration have been mighty: the united, disciplined, destructive opposition of the Republican Party, the extreme and counterproductive perversity of Senators 51 through 60, and the peculiar culture and attitude of the Federal Reserve (though why hasn't Obama at least made recess appointments for the two vacant Fed governorships?). We are lucky that they have been able to do as much as they have.

So my grade for the Obama economic team for its first year would definitely be: exceeds expectations.

[1] While it is true that "if you came up with 10 words to describe Larry, coordination and collaboration (and consensus) would not be" among them, the ten words that do describe Larry Summers are very strong ones: workaholic, quick, thoughtful, knowledgeable, incisive, encyclopedic, disciplined, dedicated, brilliant, arrogant.

[2] In Business Week, Al Hunt presents this part of the interview... rather differently:

Hunt: Does the Obama Administration have a clear, coherent economic message?

Geithner: Our responsibility is to make sure that we repair what is broken in this economy... and do all those things critical to creating the kind of environment in which private business can flourish. This crisis [is] not like anything we've seen before because of the intensity of the financial fire. But the problems America faces today are not just because of the recession. They are the result of a sustained period where we saw public policy just not doing what needed to be done...