Larry Summers Got a Bad Rap on Stimulus: Obama is the Problem

By William K. Black

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.

15 responses to “Larry Summers Got a Bad Rap on Stimulus: Obama is the Problem

  1. Ouch.

    But, Try To Imagine How Much He Cares about progressive opinion of him.

  2. “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.” – Professor Black

    Janet Yellen urged Glass-Steagall repeal and Social Security cuts:

  3. Thank you Prof. Black for your incisive explanation. I can now reconcile Presudent Obama’s putative populist rhetoric with his unfailingly stauch support of all things Wall $treet. I pray history judges his presidency harshly, as one who squandered a golden opportunity to improve the lives of ordinary Americans but chose instead to be a champion for his unscrupulous Wall $treet benefactors.

  4. charles fasola

    Can you answer honestly, Mr. Black, the question: Did you vote for obama? The first time?

  5. joe bongiovanni

    Thanks again, Dr. Black.
    1. Summers ain’t THAT bad.
    2. Obama is worse (more austere-driven by ego) than Summers.
    3. The Democratic party is both leaderless and powerless, in terms of people and policies.
    4. They’re still better than the Koch bro’s.

    Yellin supported Glass-Steagall repeal.
    Her conversion can be transformative, if sufficiently strong.
    Or be nothing, if the bankers say so.
    I’m listening.

  6. It seems like Mr Black thinks Summers has undergone some kind of conversion from his stint in the Clinton Administration to his stint in the Obama administration. Summers, in conjunction with Rubin in the Clinton administration, was one of the principal promoters of bank deregulation and was instrumental in destroying Brooksley Born’s attempt to regulate derivatives. These action were central to creation of the crisis. Mr. Black credits him with defusing a crisis of his own creation without blaming him for creating it. How can this be reconciled. How can anyone (Obama) think that such a person is qualified to run the federal reserve over a qualified person like Yellen? Summers was Obama’s overwhelming choice. Why would he be Obama’s choice if he was in the out group (Summers, Romer, et al) in all the discussions between that group and the in group (Geithner, et al) you have described and which Obama supposedly listened to? If this was the case wouldn’t Geithner been his choice for Fed Chair? After all, Geithner had been a NY Fed governor, already familiar with banking operations. It appears to me that Summers is the classic example of the Washington type who changes his stripes to remain in the circle of power, no matter how many mistakes he has made, or who is running the show, people like Greenspan, Brzezinski, and Kissinger who keep appearing in the public media no matter how much damage they do. When people have shown their stripes than don’t deserve to continue to be viewed as experts forever.

  7. John Rosenfield

    Wasn’t Larry Summers one of the three men who brought down Brooksley Born because of her attempts to oversee and regulate the derivatives markets? —— And what about Mr. Summers misogynist statements during the time that he directed the college of Harvard?

  8. Pingback: Links 9/18/13 « naked capitalism

  9. Historians will put Obama right alongside Herbert Hoover …. including Bill Clinton and George W Bush as the spoilers of the American middle class’ economy.

  10. Pingback: My “Idiotic” Insistence on Being Fair in Criticizing Larry Summers | New Economic Perspectives

  11. ” 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. ”

    To hell with the Democratic Party.

  12. I agree with TK421. To hell with the Democratic Party. We have to depend on (shudder) the Tea Party to save us. What a revoltin’ predicament!

  13. You have to know who Bill Black to understand what he is saying about Summers.

    You don’t have to say, “But wasn’t Summers wrong about bank deregulation?” Black does not deny that Summers was all wrong about bank deregulation. He didn’t say so specifically in this article, but he is one of the strongest voices decrying what Summers did on bank deregulation.

    This article just points out that on the topic of stimulus, Summers was not bad. I have been wondering for a long time how Obama’s economic program could be so conservative and so tepid on the stimulus. From this article, I still don’t know if Summers was as strong a proponent of an adequately sized stimulus as was Romer, but at least I now know that he was not in the Geithner, Romer, and Bernstein camp.