It's a given that, in a dynamic administration with diverse economic viewpoints, some voices will be wrong. What matters is that the right voices win out--that there is an incentive to be correct. That hasn't happened.
But the problem I did not see in the summer of 2009 was that the stimulus skeptics were the operational managers of the government, while the stimulus advocates were staff without line responsibilities.
... the only strong policy views in the administration's internal debate mix right now are those of people who were wrong in the summer of 2009.
If there is one economics post you read this week, this is perhaps the ultimate summary of what happened and where we are now: the great fork before us.
According to Brad DeLong, blogger and UC Berkley economist, Obama has "a very loud wake-up call" in the form of a 17% stock market plunge and falling yields on US 10-Year Treasuries. He warns that the replacements for Larry Summers, Christina Romer and Peter Orszag (figures he deems at least right on some important matters, as opposed to Bernanke and Geithner who made the worst calls) are good people but not going to be powerful or resourceful enough to deal with our continuing economic crisis:
How Should Obama Answer the Stock Market's Wake-Up Call? We-Need-Different-Cossacks Department
...their successors--Jack, Gene, and Austen--are very smart men and dedicated civil servants, but they lack the strong substance-matter knowledge and aggressive policy views of their predecessors.
He warns that Geithner and Bernanke have not learned from their mistakes enough, and are too limited by their perspective in Washington:
In order to properly respond to the situation today they need to forget everything they thought they knew about the world in the summer of 2009 and look at the situation with fresh eyes. I don't think they have done that. i don't think they can do that. And yet theirs seem to be the only strong policy voices from people with deep substance-matter expertise that Obama hears
I'd say DeLong characterizes the 2009-2010 Obama economic team pretty judiciously, based on the players' own, actual worldviews. Within the description, the stage is set well enough to see what went wrong. See for yourself:
Back in the summer of 2009, Barack Obama had five economic policy principals on the Treasury Bench:
Tim Geithner, who thought that the administration and the Fed had done enough to stabilize the economy, that we were on track for a rapid recovery, and that the principal economic policy problems were going to be avoiding an unwanted uptick in inflation and dealing with the long-run budget.
Ben Bernanke, who thought that the administration and the Fed had done enough to stabilize the economy, that we were on track for a rapid recovery, and that the principal economic policy problems were going to be avoiding an unwanted uptick in inflation and dealing with the long-run budget.
Peter Orszag, who thought that the economy probably needed some (relatively small) additional fiscal, banking, and monetary stimulus to boost demand, but that the path to getting to that stimulus was to make it part of a package with policies to deal with the long-run budget.
Larry Summers, who thought that the economy probably would need some additional fiscal, monetary, and banking-side stimulus--if only as insurance--and that dealing with the long-run budget could wait until the recovery was well-established (although in an ideal world Washington would be able to do more than one thing at a time and so it would not have to wait).
Christy Romer, who thought that the economy probably needed (much) more additional fiscal, monetary, and banking-side stimulus--especially as insurance should things break badly--and that dealing with the long-run budget crisis probably should wait until the recovery was well-established: that the key point was "no 1937s!"
Good replacements would "most give [DeLong] confidence," replacements who "saw the world as it was in the summer of 2009."
I will not post the juicier, policy bits of his post here, only to avoid copying too much. Those segments on monetary policy and some of the more Keynesian measures, however, are well worth the read. And it's a relatively brief post. Here's that link again.