Larry Summers is one of those revolving door members of the DC elite, who constantly come and go from Washington on a regular basis. His specialty is economics: he was Secretary of the Treasury under Clinton and head of the National Economic Council for President Obama. If you don't like what's happening with the economy, well Summers was/is one of the key players in getting us where we are today.
So it's more than a little interesting that Summers - rotated back to Academia - is now coming out with some pretty harsh words about the size of the stimulus back in 2009, why it was that size, and what we need now. Is anyone in the press (or the White House) paying attention? And should they? (more)
Right now the debate on what to do about an economy where millions of people still can't find enough jobs is largely being fought out on Republican terms: Deficits will kill us all! The Government MUST slash spending, throw out healthcare reform, trash Medicare, and 'save' Social Security by turning it into a retirement program that only kicks in about the time people need to pay for their funerals. Oh, and taxes of any kind are off the table. Especially ending tax breaks for corporations and the super rich. Don't even go there. And if the Democrats don't agree to this, the Republicans are going to let the country go bust!
In an wonderful display of bipartisan outreach, the Democrats in Washington appear to be mostly going along with this at least part way. Okay, maybe a few token tax hikes are on the table, closing some loopholes... as a figleaf to cover giving the Republicans nearly everything they want. Sure the president has finally shown up and done a little tough talking - but the debate still hasn't shifted ground much. Nor is he getting much covering fire from fellow Democrats on this.
Kevin Drum has some thoughts on all of this which are worth considering.
But then, for about the thousandth time, my mind wanders over the past ten years. Republicans got the tax cuts they wanted. They got the financial deregulation they wanted. They got the wars they wanted. They got the unfunded spending increases they wanted. And the results were completely, unrelentingly disastrous. A decade of sluggish growth and near-zero wage increases. A massive housing bubble. Trillions of dollars in war spending and thousands of American lives lost. A financial collapse. A soaring long-term deficit. Sky-high unemployment. All on their watch and all due to policies they eagerly supported. And worse: ever since the predictable results of their recklessness came crashing down, they've rabidly and nearly unanimously opposed every single attempt to dig ourselves out of the hole they created for us.
But despite the fact that this is all recent history, it's treated like some kind of dreamscape. No one talks about it. Republicans pretend it never happened. Fox News insists that what we need is an even bigger dose of the medicine we got in the aughts, and this is, inexplicably, treated seriously by the rest of the press corps instead of being laughed at. As a result, guys like Marco Rubio have a free hand to insist that Obama — Obama! The guy who rescued the banking system, bailed out GM, and whose worst crime against the rich is a desire to increase their income tax rate 4.6 percentage points! — is a "left-wing strong man" engaged in brutal class warfare against the wealthy. And Rubio does it without blinking. Hell, he probably even believes it.
We are well and truly down the rabbit hole. The party of class warfare for the past 30 years is fighting a war against an empty field and the result has been a rout. I wonder what would happen if the rest of us ever actually started fighting back?
Now if this seems like a long set up to talk about what Larry Summers is saying, I'm getting there. Summers is part of the permanent non-elected governing class that routinely gets called on for high government posts because of their expertise, their reputations (inside the Beltway) - and because of the constituency they represent. Matt Taibbi offers up an assessment of the economic team the President, who proclaimed Change was his agenda, brought in to carry out that change.
I hear all the time from people who complain that it’s naive to wonder why we put Wall Street executives in charge of policing Wall Street — that this is actually quite a sensible policy, because we need people with experience in that world making these decisions. The reason people say this has nothing to do with reality and everything to do witht he fact that the financial markets are intimidatingly complex. When Enron buys a seat at the table to conduct energy policy under the Bush administration, everyone knows what that is. When Reagan hires notorious union-busters to run the NLRB, everyone knows what that is. And when we hire investment bankers to run banking policy, and put investment bankers in charge of handing out bailout money to investment banks, we ought to know what that is. But for some reason we don’t seem to see it the same way, not as clearly.
The Taibbi link above starts out with a specific reference to Summers and his ties to Wall Street.
It likewise makes perfect sense that Merrill Lynch, a company just months removed from having to be rescued from bankruptcy by an eleventh-hour, pseudo-state-subsidized buyout by Bank of America, would decide to spend $45,000 on a speaking appearance by Larry Summers because, well, they really valued his economic expertise and his proven ability to rally the troops with his stirring rhetoric. It certainly had nothing to do with the fact that a) it was eight days after a Democrat was elected to the presidency, and b) Summers had a long history of being one of the key policymakers in Democratic Party politics, and c) Merrill was absolutely not going to survive more than a few more months unless taxpayers forked over another twenty billion or so to cover the giant hole in Merrill’s balance sheet that was, at that time, still being hidden from Bank of America and its shareholders.
Fast forward to July 2011. The stimulus the White House forced through Congress in 2009 (back when Democrats 'controlled' both houses) is largely considered a dead issue. The nicest things heard about it are that the government spending kept things from getting worse, but that was then. (It's GOP dogma of course that the stimulus was a disaster that actually caused the current stagnation, crop circles in Kansas, the Federal deficit to explode, and an outbreak of giant man-eating ladybugs in Pismo Beach. Or something like that.)
The Keynesian idea that the government must spend to restart an economy that has tanked because of low demand for goods and services, because no one else will or can, is pretty near an unspeakable truth these days. The only stimulus that seems to be permissible is tax cuts, or spending that is 'balanced' by cuts elsewhere. And anybody who says different is just a hippie who doesn't understand these things.
So, in light of all this it's been interesting to hear Summers coming out lately with calls for more stimulus spending and admission that the original package back in 2009 wasn't big enough. The White House position - in the face of constant GOP attacks on the spending - all along has been it was just the right size at around $900 billion. Note: there were those who said even before the stimulus was enacted that it was not going to be big enough. They were and continue to be marginalized.
In practice, it was even worse, because one of the key elements of the plan — aid to state and local governments — was cut back sharply in the Senate. We ended up with only about $600 billion of real stimulus over that two-year period.The failure to address this back then is coming home to roost now as Republicans use state budgets gaps their policies created as an excuse to decimate state social programs, unions, and regulation.
So this wasn’t a test of fiscal stimulus, even though it has played out that way in the political arena: the whole thing was obviously underpowered from the start.
So what does Summers have to say now? An interview July 1, 2011 at Marketplace on American Public Radio picks up on what he's been saying lately. Here's some quotes from the Jeremy Hobson Marketplace interview transcript (audio at the link as well):
HOBSON: That's not true? You weren't pushing for a less-than $1.2 trillion stimulus?
SUMMERS: No, I mean it's a much more complicated story, but those reports are not accurate. It was my judgment as an economist that there was no danger of doing too much stimulus and one should achieve as much stimulus as possible. There were a set of political calculations having to do with what the Congress could accept that were mostly determined by the president's political advisers and ultimately by the president which pointed towards the size of the program that was ultimately passed. But the economic advice that I gave was that the stimulus program should be as large as it could be.
There's more than a little CYA going on here. Summers claims as an economist, he knew the stimulus had to be much larger - but political considerations overruled that in favor of a much smaller package missing key ingredients because it was 'possible'. (Again - this is while Democrats controlled both houses in Congress.) While Summers defended the stimulus at the time, he let those political considerations override his own judgment as an economist. Sometimes that's considered being a team player. Sometimes that's considered one of the hallmarks of being a hack. Summers still has a job. Millions of Americans don't - and won't any time soon. (For entertainment value, here's a splendid example of knee-jerk brain-dead conservative response to Summers. Short version: taxation is theft, and we can only create jobs by making sure rich people get to keep all the money they can grab.)
Be that as it may, Summers belated embrace of apostasy offers up some things to consider.
• The White House embraced and defended an economic policy their own inside advice told them would ultimately be inadequate. In other words, they settled for what they thought they could get rather than fighting for what was needed and hoped it would work out anyway.
• Maybe the idea was that pushing through Healthcare Reform would need all the political capital they could muster, so they wanted to conserve it. But it seems as though the same pattern prevailed: they settled for what they thought they could get rather than fighting for what was needed.
• The larger point of these decisions that allowed political concerns to drive policy, instead of fact-based principles has been to concede the strategic and tactical advantages to the Republicans. They've been largely successful in using their message discipline and media control to discredit partial successes into failures - and preclude efforts by the Administration to do what will work rather than what is politically possible. Or even to say so.
• Being conflict-averse is a losing strategy against an opponent whose goal isn't merely mutual accommodation, but rather total destruction of all who oppose them. The problem with accepting what you can get instead of what you need is simple: on those terms, even when you win - you lose.
So, a few questions to ponder. Is Larry Summers suffering a belated attack of conscience? Is he trying to redeem his reputation in light of what he sees happening? Is he simply manifesting the concerns of his real constituency, who is beginning to worry that hardcore fanatics in DC will actually blow up the government - and wreck their 'good thing' in the process? If the latter, that alone should set off alarm bells. If the former, ditto. Either way, it's worth taking a look at what he's saying even while we consider the source.
And a few larger questions. Has the White House learned anything? Are they going to continue to settle for what they think they can get - or fight for what WE need as a country? At this point in time, I would hope that the President is ready to hear some advice concerning his recent attempts to get the Republicans to 'do the right thing', and the continued risks of seeking compromise over conflict.
As Lazarus Long noted: "Never appeal to a man’s “better nature.” He may not have one. Invoking his “self—interest” gives you more leverage." As long as the administration and Democrats in Congress continue to allow Republicans have total veto power over their policies while suffering no consequences for their opposition to everything the President is trying to do, the Republicans have no incentive to change their ways. Maybe now is a time for post-partisanship - but nobody got word to the GOP.
Destruction of Obama is their goal and they've admitted it. Not putting people back to work. Not making sure people have health care or a secure retirement. All they want from government is a tax-cutting, safety-net slashing, de-regulating wealth-transfer machine. If they have to take the country down to get it, well that's just an annoying side effect.
Does the President get this yet? Read and decide for yourself.