Fail upper Larry Summers
The most surprising thing occurred in Washington in recent weeks, a development significant enough to warrant attention: Post-Occupy Wall Street politics touched down in the U.S. Senate. It happened in the form of building opposition to President Obama's reported consideration of Larry Summers to be the next Federal Reserve Board chairman. Needless to say, President Obama engaged in a vigorous defense of Mr. Summers before fellow Democrats, as is to be expected. The administration has never wavered from the Clinton/Third Way economic model of fiscal restraint, free trade, low taxes, financialization and light regulation. But for the first time I can remember, a sign of opposition to this economic model has begun to appear in the halls of Congress, where, Wall Street has long been the strongest force in both parties. This is a significant development for Democrats and America.
Next to former Clinton Treasury Secretary Robert Rubin, there is perhaps no more notable public official most identified with Third Way economics than Summers. Summers is born and bred elitist, attending only the best schools, having the best connections, and ascending to the top of the east coast power centers by being chief economist of the World Bank, Treasury secretary, president of Harvard, and chief economic adviser to President Obama. Much like many American chief executives, failure on the job hasn't stopped him from getting handsomely rewarded and promoted. While at the World Bank, said that global warming wasn't an economic problem, though he has since retracted that statement after been proven wrong. While Treasury secretary, he said there was no risk in the derivatives market, though he has since retracted that statement after having been proven wrong. As president of Harvard he lost a billion bucks worth of Harvard's endowment betting on ... you guessed it ... derivatives. As president Obama's chief adviser he has been the architect of President Obama's economic record of weak, slow growth and high unemployment. Larry Summers has consistently been the poster child for "fail up" so it is no surprise that he is being considered for another promotion. Who wouldn't give a give a guy who blew a billion dollars control of the nations money?! That's a qualification these days.
Occupy Wall Street seems like an minor event today, but if current trends continue in hindsight it is going to look like a turning point in American history. All across the country, opposition to the economic and political establishment and their order is growing. The same people who told us nothing could go wrong with bank deregulation and turning our economy from one of production and innovation to one of flim flammery and an ever growing list of financier's card tricks, are now under growing pressure from the discontent in the country. The wealthy establishment in the country have overplayed their hand, but the full effects of their mistake are only slowly manifesting themselves. It will still be many years before we see real change in Washington as entrenched as the current American economic policy is firmly entrenched in all business sectors and in the elites of both parties. But something significant happened: More than a dozen Senate Democrats announcing open opposition to a president of their own party of an appointment.
By Washington standards, Larry Summers is the perfect choice for the Fed. He has failed at just about everything he's ever done, he's rich, and he is friends with the right people. Janet Yellin is being touted as a better choice, but I doubt she would be significantly different excepting in the fact that she is a woman and an important barrier would be broken with her appointment, especially in the all-male world of central banking. However, the opposition to Summers is a good sign. It is a sign that the fortunes of working people and the middle class in this country have suffered because of this man, Larry Summers, has finally gotten some attention in high places. Ten years ago ... even five years ago ... Summers would have been hailed and feted for his "keen insight" or whatever. Pundits would sing his praises. Everyone would vigorously defend him, from the president on down. CNBC would give us a glowing 1-hour documentary of his life and times. But now he's under fire. So much so, that Democrats are attacking him in the presence of the president, prompting the president to push back hard on Summer's behalf. I think that is a direct result of the gripping stagnation affecting most of the people in the country. Resistance to the current economic order is building and the opposition to Larry Summers in Congress is an example of that.