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View Diary: Economics Daily Digest: Geithner's goodbye (25 comments)

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  •  William Black (6+ / 0-)

    clearly states the case against Geitner.

    Here's from Black's 1/10 piece on NEP: [my highlights]

    Obama spread the same dangerous myth about austerity. Obama's initial policy was influenced primarily by his principal economic advisers, Larry Summers and Christina Romer. They favored stimulus and understood it needed to be much larger than the amount that the White House felt could be passed. Over time, however, Treasury Secretary Geithner became far more dominant as the strength of his personal relationship with President Obama grew. Geithner was a Republican who had become an Independent as a fig leaf. He shared the views of so many elite bankers who he had served as President of the Federal Reserve Bank of New York. Geithner wanted austerity, including severe cuts to social programs and the safety net.

    "From Zach Goldfarb's excellent profile of Treasury Secretary Timothy Geithner's success inside the Obama administration:

    … Once, as [then chairwoman of the Council of Economic Advisers Christina] Romer pressed for more stimulus spending, Geithner snapped. Stimulus, he told Romer, was 'sugar,' and its effect was fleeting. The administration, he urged, needed to focus on long-term economic growth, and the first step was reining in the debt.

    Wrong, Romer snapped back. Stimulus is an "antibiotic" for a sick economy, she told Geithner. 'It's not giving a child a lollipop.'

    In the end, Obama signed into law only a relatively modest $13 billion jobs program, much less than what was favored by Romer and many other economists in the administration."

    Geithner is not an economist and what he "knows" about economics is mostly dangerous myths. That is one of the reasons why Geithner was such a major contributor to never detecting or countering the epidemic of accounting control fraud that drove the financial crisis, hyper-inflated the housing bubble, and produced the Great Recession. It took some significant arrogance or sexism to tell one of the nation's most famous macro-economists that she was 180 degrees wrong about macro-economics.

    The "$13 billion jobs program" is a sick joke as a response to the Great Recession. Our central economic problem is jobs. The central jobs problem is not a lack of training -- it's a lack of demand. If consumers don't buy, employers don't hire. The inadequacy in demand is measured in the trillions of dollars. A trillion is a thousand billion. A $13 billion program is one-one- hundredth of the appropriate size to begin to deal with the Great Recession. Why not adopt a federal jobs guarantee program that ends the waste and injury of people willing and able to work being kept idle? Why is it politically possible to pay people not to work but not to give productive jobs to those who want to work and are able to do so?

    President Obama's comments show that he does not understand these issues. First, he credits job gains to Geithner's "steady hand."

    "And thanks in large part to [Treasury Secretary Geithner's] steady hand, our economy has been growing again for the past three years, our businesses have created nearly 6 million new jobs."
    … If Geithner had not helped block the push by Romer and Summers within the administration for greater stimulus the U.S. recovery would be far more robust and millions more Americans would be employed. (In fairness, the Republicans and conservative ("Blue Dog") Democrats who killed the revenue sharing portion of the stimulus bill and insisted that much of the stimulus had to be in the form of the extension of tax cuts for the wealthy, which have a far smaller stimulus effect than alternatives, also cost millions of Americans their jobs.)

    Geithner led the administration's push to end the single-most effective stimulus program - not collecting the full payroll tax.

    Geithner led the charge raise the tax and kill the million jobs.

    The payroll tax is an extremely regressive tax, so the partial tax "holiday" was particularly effective in getting cash into the wallets of those who most needed the money and were most likely to spend it on their pressing needs. (A Federal Reserve study was recently released showing the "multiplier" (stimulus) effect of the "holiday" was even greater than anticipated.) Collecting the full tax, which resumed in January 2013, is an act of austerity.

    "Independent analysts say that the expiration of the tax cut could shave as much as a percentage point off economic output in 2013, and cost the economy as many as one million jobs. That is because the typical American family had $1,000 in additional income from the lower tax."

    Geithner led the charge raise the tax and kill the million jobs.

    "'This has to be a temporary tax cut,' said Timothy F. Geithner, the Treasury secretary, testifying before the Senate Budget Committee this year and voicing the view of many in the White House and on Capitol Hill. 'I don't see any reason to consider supporting its extension.'

    The deficit fell because we improved our recovery through the "automatic stabilizers." These stabilizers do not need new legislation to create them, so they act "automatically" to respond to a recession (or inflation). In a recession, the stabilizers work in a counter-cyclical (stimulus) fashion to make recessions less severe and long-lasting. The stimulus program expanded this stimulus. As economic growth increases due to the increased demand, unemployment falls and revenues rise while expenditures for the unemployed fall. The result is that the federal budget deficit falls. Had we followed Geithner's advice and inflicted austerity we would be back in recession and facing growing deficits.

    That's a wrap.

    United We Understand

    by dorkenergy on Mon Jan 14, 2013 at 04:32:57 PM PST

    [ Parent ]

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