This Is Horrible!
Fiscal Policy in a Depressed Economy

Rich Yeselson on Noam Scheiber's "Escape Artists"

Rich Yeselson:

Obama's Squandered Recovery: Scheiber’s strategy is to show the reader that, as they used to say in the Reagan years, “personnel are policy.”… [K]ey people do what their history and temperament have prepared them to do. Thus, Tim Geithner’s long history of working with banks as a regulator guides critical decisions during his tenure as Secretary of the Treasury…. Obama naturally wanted experienced people handling the economy. When the time came to make appointments, he plucked… important players from the tree of Robert Rubin…. Scheiber astutely identifies different strains in the Rubin genealogy. Geithner… the “restorationist”…. Summers… a “reformist” Rubinite, unwedded to obsessing over the deficit during a massive recession. Orszag, the team’s primary deficit hawk…. “Orszag’s power," Scheiber writes, “came from the harmony between his worldview and the president’s. Both men were fierce anti-partisans; both shunned ideology.” Orszag thought there were practical limitations to how much the government could spend, and that much of the stimulus would inevitably be rolled into the long-term deficit….

Cristina Romer… was the pure academic…. Only she kept the recession at the top of her agenda…. Summers is an inside angler but an inept one… squanders his greatest comparative advantage over everyone else, that on these issues, his voice was the one the president trusted most….

Scheiber’s narrative is lucid enough so that the reader can begin to question, along with the author, why several mistakes are made more than once. The White House trusts Iowa Republican Senator Chuck Grassley time and again…. The deficit fetish culminates in the ghastly 2011 effort by Obama’s new Chief of Staff, Bill Daley, and David Plouffe… to increase the president’s credibility with independent voters by positioning him as a budget cutter… dependent on the fantasy, even after the Tea Party ascendancy, that a deal can be cut with the Republicans. But there are strange omissions in the book. Scheiber fails to discuss the successful auto bailout…. He doesn’t point to the Republican’s unprecedented use of the filibuster…. Obama reappointed moderate Republican, Ben Bernanke, as Fed chair, instead of endorsing a more aggressive alternative…. Scheiber… does not pause to give his readers an understanding of Obama and his team’s thinking about monetary policy.  

I happen to think that if the health care system is rationally integrated and costs are controlled in 20 years, then the Affordable Care Act will ratify Obama’s place as one of America’s most important domestic policy presidents. But Scheiber is right that if Obama and his team accomplished a great thing in fending off depression, they did not relentlessly seek out every possibility to increase GDP and job growth. Economically, things could have gotten even worse than they did…. But… sthey should have had a better instinct for the unique crisis they faced…

I see it differently: a better instinct in late 2008-early 2009 would have been good, but hoarding rather than giving away your power to act in 2010 and 2011 should things go south would have been much better.