In the controversy over who should replace Ben Bernanke as Chairman of the US Fed, a fair bit is being made of the fact that Larry Summers is (to put it politely) a jerk. Without denying this, I’d like point out that, when it really mattered, Summers was thoroughly outjerked by the genuine article, Rahm Emanuel.
The occasion was the decision on a stimulus package needed immediately after Obama’s inauguration. Emanuel’s brilliant strategy was to go for as small a stimulus as possible, declare victory on the economic front, then turn to the main game of cutting a deal with the Republicans on health care reform. We all know how that turned out, 1 and anyone who recalled the Great Depression could easily have foreseen it. I can recall how stunned I was that Obama failed to take the obvious opportunity to nail Bush and the Repubs for the crisis, and switch to a single-minded focus on economic recovery.
The Keynesian analysis done inside the White House by Christina Romer and outside by Paul Krugman showed that what was needed was a stimulus of at least $1.7 trillion. Based on his subsequent commentary, it’s clear the Summers understood and agreed with this. If he had lived up to his reputation, Summers would have pushed this through the White House by demonstrating, beyond any doubt, that Emanuel was the kind of fool he is famed for not suffering gladly. Instead, he first made Romer reduce the estimate to $1.2 trillion, then dropped it from his brief without telling her, giving Obama a range from $600 billion to $800 billion.
Summers is great at saying the unsayable when it comes to things like shipping toxic waste to poor countries or making baseless speculations about genetics and gender. But when it really mattered, he couldn’t come up to scratch.
Note: Out of laziness, I omitted the link to the piece by Noam Scheiber, on which I relied. I’ve added it now.
Fans of 11-dimensional chess might want to make the case that Obama deliberately threw the 2010 election to the Tea Party, foreseeing that the resulting hubris would drive the Repubs mad, and therefore lead to their ultimate destruction. But I can’t impute such subtlety to Emanuel. ↩