President Obama Needs Better Economic Advisers


Robert Reich on The Daily Show (September 17, 2013) promoting his new documentary, Inequality for All

While liberals everywhere celebrated the "win" of Larry Summers withdrawing his name for consideration for the nomination to Fed Chief, I was struck by the statement put out by the White House:

Larry was a critical member of my team as we faced down the worst economic crisis since the Great Depression, and it was in no small part because of his expertise, wisdom, and leadership that we wrestled the economy back to growth and made the kind of progress we are seeing today.

Wait..whu-what? I'm not an unfair person and I'm willing to grant that the actions of the Obama White House kept the country (and the world) from dropping off the economic cliff. But beyond that, come on. The growth we've seen has been glacially slow, and worst, almost entirely clustered for the top 10% of earners, who really didn't suffer all that badly when the economy plummeted in the first place. And that's exactly why there was so much blowback on the possibility of Larry Summers heading the Fed. He may get some credit for getting the economy on track, but he also deserves full culpability for his actions that put us on that brink.

And so for the Obama administration to ignore that very important aspect of Larry Summers' record (and the very reason there was so much blowback from outside the Beltway No-Failure Bubble) just proves that he is being advised by a very insular group of people who are using a very different metric to define success:

Wherever the president turned, it would have been abundantly clear to him that tying his fortunes to Summers would have been akin to tying two rocks together to see if they float. Instead, Obama listened to his "trusted economic advisers", who have again, as they have for years, failed to read the room correctly.

The president's economic team has changed over the past few years, but currently consists of chief economic adviser Gene Sperling, Treasury Secretary Jacob Lew, Jason Furman at the Council of Economic Advisers and Office of Management and Budget director Sylvia Matthews Burwell. Fill another mug for Tim Geithner (who has left government but apparently is deputized to help Obama pick the new chair of the Federal Reserve) and several others. The assumption, at least going by the gossip from "senior administration officials" is that the team, which has worked together since the Clinton years more or less, supported Summers to get the band together again.

The idea, apparently, was that with a sufficient quorum, this merry band of (mostly) brothers could, through the magic of their sheer collected brilliance and perhaps a few incantations, recreate the booming economic magic of the Clinton years in the deepest recession since the Great Depression. Apparently the addition of Janet Yellen, an eminently qualified woman – who, by the way, also worked with that Clinton team – would ruin the special magic of this team. Perhaps, with her correct calls on housing and the economy, she would interfere with the paralysis around fiscal policy and the budget that has plagued the White House for the past few years. Yellen, like Bernanke, would be no newcomer to picking up the slack left by a dysfunctional relationship between Congress and the president.

That Obama economic team, like it or not, is in for more changes. As of this weekend (only 24 hours before Summers withdrew) Sperling, his biggest supporter, has said he will leave the administration.

Even if Yellen does win the Fed job, that doesn't solve Obama's larger problem of having steered the economic conversation in the wrong direction for months. He has locked himself in a bubble in which he bases his relationship with his economic advisers on "trust" (code for familiarity) even when their advice is at odds with the ample evidence from the real world.

To shut out the opposition to Summers, the president had to have been wearing earplugs. How closed is his economic circle? How well do they fit the profile of honest brokers about our economic situation? Loyalty is a great thing. But that kind of trust is clearly not working for Obama. Maybe he should stop relying on those he knows, and rely instead on those who know what they're doing.

Comments

We welcome relevant, respectful comments. Please refer to our Terms of Service for information on our posting policy.