By William K. Black. This article was first published on New Economic Perspectives.
I am a strong supporter of Janet Yellen and believe her support for the fiscal and monetary policies best designed to produce a stronger, prompter recovery from the Great Recession makes her the superior replacement for Ben Bernanke. The criticism of Larry Summers’ position on fiscal stimulus, however, was generally inaccurate. Within the Obama/Biden administration, the best known economists (Summers, Christina Romer, and Jared Bernstein) proved dramatically better economists than did the non-economists who eventually came to dominate Obama’s economic policies (Timothy Geithner, Jacob Lew, and William Daley). Summers, Romer, and Bernstein were strong voices in favor of fiscal stimulus. Summers deserves some additional praise because he had to break from his mentor’s (Bob Rubin’s) pro-austerity dogmas to reach his anti-austerian position.
Obama’s lead non-economists were austerians who denigrated fiscal stimulus, were terrified by the deficits, and eager to cut the safety net. Over time, they became Obama’s dominant economic advisors even as their predictions consistently proved false. Obama supported them because he shared their dogmas. As I explained in a recent column, Obama’s six senior economic advisors are unreconstructed Rubinites who share the President’s dogmas.
The willingness of Summers, Romer, and Bernstein to oppose Obama’s austerian dogmas reflects well on their integrity. The Obama/Biden administration, of course, has failed to appoint prominent economists as successors to Summers, Romer, and Bernstein who are willing to oppose vigorously Obama’s pro-austerian dogmas.
Geithner, Lew, and Daley championed what Obama hopes to be his “legacy” in the history books – the Grand Bargain (sic, Betrayal) that would inflict even greater austerity on the Nation and begin the process of making massive cuts in the safety net. Had the four horsemen of austerity succeeded in July 2011 in reaching the Grand Betrayal with the Republicans they would have pushed our Nation back into recession and made Obama a one-term president. Fortunately for the Nation, the Tea Party Republicans’ demands proved so extreme that Obama could not get the Grand Betrayal finalized in July 2011.
Obama could not get agreement on the Grand Betrayal, but he did negotiate an austerity deal in 2011 that slowed the recovery and that – at his insistence – contained the “sequestration” clause that he now admits has inflicted still greater austerity and cut vital programs. Obama also joined with the Republicans to kill the partial moratorium on collecting the payroll tax which further slowed the recovery. This Sunday, September 15, 2013, Obama went on ABC News and while denouncing the sequestration agreement that he insisted be included in the 2011 budget austerity deal went out of his way to state his desire to reach an agreement with the Republicans to cut the safety net.
Obama still wants his legacy to be reaching agreement with the Republicans to slash the safety net. He admitted in the ABC interview that virtually all the benefits of the weak recovery have gone to the Top 1 percent. He admitted that the result was the spread of grinding poverty to millions of additional Americans. His “solution” is to invite the Republicans to join him in betraying the public by cutting Social Security and Medicare for the elderly, Medicaid for the young, and food stamps for the poorest Americans. If Obama is able to commit the Grand Betrayal he will further weaken the recovery and hand control of the Senate to the Republicans in 2014.
I have many disagreements with Summers about regulation, but the idea that Obama is getting his advice on fiscal policy primarily from fellow-lawyers and unreconstructed Rubinites like Jacob Lew rather than economists like Summers should terrify the Nation (and the Democratic Party). It is, once more, the task of the non-Wall Street wing of the Democratic Party to save the Nation and the Party from Obama. We need to save Obama from his vain quest for greater historical fame, particularly now that his Nobel Peace Prize has become the defining example of the concept of irony.