Notes Toward an Understanding of Obama's Economic Policymaking
First, Eight Passages from Ron Suskind's Confidence Men that seemed to me worth noting:
The internal victory of the "do less" camp:
Two passages on the curious passivity of Obama as it became clear not just to the Left Opposition but to everybody that the administration needed to do more:
Ron Suskind's view of relative standing inside the Imperial Court:
A passage I noted that seems to me to reflect very badly on Obama:
Two passages I noted that seem to me to reflect badly on Suskind:
Reading Ron Suskind's "Confidence Men"...: Why does Ron Suskind believe that the Treasury Department's Assistant Secretary for Economic Policy "carries the additional title--dating back to the nineteenth century--of 'Chief Economist of the United States'"?
Coverage of Ron Suskind's Confidence Men has so far focused almost exclusively on the gotchas. And the gotchas in this book are three:
- Tim Geither, home alone in the Treasury without confirmed deputies in the winter of 2009, was overwhelmed with things to do and dropped assignments on the floor--including the assignment to construct a resolution plan for Citigroup.
- Larry Summers does not have a future career as leader of a self-esteem therapy group.
- Senior female officials in the administration felt that it was too much of a middle-aged boys' club, and that this was a problem. (Curiously, you will not learn that those same senior administration officials thought that the president was their friend and ally in fighting this middle-aged boys' club atmosphere.)
It is not clear to what extent these gotchas are fire or merely smoke. That Larry Summers roams the world leaving enemies in his wake is no secret. That Tim Geithner was unwilling to make a banker cry after his participation in the fiasco that was the Lehmann Brothers application of "tough love" to the banking system was not news to me at least. And former White House Communications Director Anita Dunn claims that Ron Suskind gets her quotes wrong. She has a reputation as somebody who stands up, says what she thinks, and confirms that she said what she did indeed say. Other senior Obama policymakers say that Ron Suskind promised them quote approval and did not deliver. It is barely possible that they are deciding that now is the time to spend their reputations in defense of the president. It is not likely.
So let's dig deeper than the gotchas.
When I first learned in the summer of 2009 that Ron Suskind's next book was going to be about the making of a economic policy in the Obama administration, I looked forward to it. As of early 2009 I thought that the Obama economic policy team was first rate. All five of the principals, Bernanke, Geithner, Summers, Romer, and Orszag, seemed to me among the very best candidates in the world for senior economic policymaking jobs in an American administration. Plus they were all my friends, or at least friendly to me. I did think that some of them were in the wrong jobs: Summers made much more sense to me as Treasury Secretary than as NEC chair. Geithner and Orszag seemed to me much better suited to be NEC Chair than to manage large departments with line authority. But although the economic situation was horrible the economic policy team looked very good. So I thought the story that Suskind's book would tell would be that of success: smart and serious people who knew what they were doing fighting about substance, presenting the president with good options, him choosing the best one, and the course of the economy during the Obama administration being if not great at least better than we all feared after the bankruptcy of Lehman Brothers.
And, indeed, there is a perspective from which Obama administration economic policy has been a considerable success. The banking system collapse was averted. The spike of the unemployment rate to 15% or higher was averted. Obama passed a pretty good financial regulatory reform. Obama passed a pretty good health-care financing reform. Obama passed the largest quick fiscal expansion he could get through congress (using the Reconciliation process would have taken a lot longer). We are left with a jobless recovery, and with crippled mortgage finance and construction, and a ticking bomb in Europe. But, one could say (and I am sure Tim Geithner does say every hour) things could have been much worse--and would have been much worse had Republicans controlled any substantial share of economic policy or been more effective at blocking Obama initiatives.
But this is not the only perspective. As the past 30 months passed, I have became more and more alarmed. The policy choices being made by Obama appeared to be not only not the best but not even terribly good ones. When a new administration takes office, it needs to (1) forecast what is most likely to happen, and (2) design and implement policies that will deal with what is likely to happen and put the economy on a trajectory toward a good outcome. The Obama administration did that--I think that some of its initial policies were wrong, I think that Tim Geithner was so scared that his attempt to get tough on banks during the Lehmann Brothers bankruptcy had backfired so catastrophically that his judgment was impaired, but given the press of events I would give the administration moderately high marks for the policies it designed and implemented up through, say, April 2009.
Thereafter things seemed to me to fall apart. An administration has a third task it needs to carry out: (3) think hard about the risks--what if the administration has misjudged the situation? what if more things go wrong?--figure out what it needs to do to buy insurance against those risks, and do those things as well. It needs to ask itself:
- What if we are wrong in our estimation of the situation--what might the world then look like three years from now?
- What if more things go wrong in the next year or two--what might the world then look like three years from now?
- In those possible scenarios, what will we wish then that we had done today to prepare the way for dealing with the situation?
And there the Obama administration seemed to fail. I wanted to figure out why.