White House National Economic Council Chairman Lawrence Summers speaks at the Brookings Institution, March 13, 2009. (Photo by Mark Wilson/Getty Images)
by Frank James
One of President Barack Obama's top economic advisors said Friday that there are already signs the $787 billion economic stimulus plan is helping the economy but that it is far too early to reach broad conclusions on how successful it will be overall.
Lawrence Summers, chairman of Obama's National Economic Council, also defended the president's efforts so far to revive the economy, arguing that the self-reinforcing nature of the economic downturn was so strong that only massive government action could break the cycle.
In a speech at the Brookings Institution think tank, Summers, long considered one of the nation's smartest economists, outlined the factors that led to the economic crisis.
The over optimism that led to a bubble in prices for real estate and other assets which, once it collapsed, set off an economic chain reaction that led to job losses, lower incomes and foreclosures.
"Prices fall. People sell. Instead of an expectation of new buyers, there is an expectation of new sellers. Greed gives way to fear. And this ... fear begets fear."
Breaking the "vicious cycle" was something only the federal government acting decisively could do, Summers said.
"We need to do what's necessary to get us out of the crisis we inherited," Summers said "... This was not a set of economic processes that would simply automatically fix themselves if you didn't act."
Summers pointed to some signs that signal that the stimulus may already be averting parts of the economy from further shutting down.
"It may retain 14,000 teachers in New York alone, and cops and teachers and public employees across state and local governments," he said. Furthermore, the low and middle-class tax cuts contained in the legislation would soon be seen in the reduced withholding taxes in workers' paychecks, he said.
Summers also took on Obama Administration critics who have recently accused the administration of trying to do too much across a broad agenda that includes reforming health care and improving education instead of focusing single-mindedly on the economy.
The administration was attempting to lay the groundwork for a recovery that would be based on a more solid footing than previous recoveries which were largely driven speculative bubbles.
"Confidence today will be enhanced, if we put measures in place that assure that the coming expansion will be more sustainable and fair, in the distribution of its benefits, than its predecessor," Summers said.
"That is why the president has priorities that go beyond the immediate goal of containing the downturn and promoting recovery," he said.
Summers, who served as Treasury Secretary during the Clinton Administration, also came to the defense of the current occupant of that cabinet office, Timoty Geithner, who was harshly criticized for not delivering a program with detailed specifics for solving the crisis of banks having too many dubious assets on their balance sheets.
"You know, I think that Secretary Geithner has handled this in a difficult and courageous way," Summers said. "The easy thing to do would be... would be to lay out a nine-point plan with the illusion of specificity and the sense of certainty about what the future would bring.... It's so easy that we saw half a dozen of them from the previous administration. It's just that they were different each month.
"The right approach... is an approach that is based on deeds and not words. It is an
approach that lays out a framework that, unlike so much of the commentary, actually recognizes the enormous complexity of the problem and the balances that need to be struck..."
Comments
Going a trillion dollars into debt to "fix" a downturn caused by too much debt, is like trying to "cure" an alcoholic by giving him gallons more alcohol.
Posted by: Inconvenient Truth | March 13, 2009 1:19 PM
For a view of the Geithner reality, which is far removed from Mr. Summers's fantasies, see today's Washington Post:
"Fourth Nominee Withdraws From Treasury's Roster
By David Cho
Washington Post Staff Writer
Friday, March 13, 2009; Page D01
H. Rodgin Cohen, chairman of the New York law firm Sullivan & Cromwell, has withdrawn his name from consideration for deputy Treasury secretary, becoming the fourth pick for a prominent Treasury Department post to pull out in recent weeks.
A prominent attorney who has advised many of the top Wall Street firms, Cohen dropped out after the White House found an issue during his vetting process, two sources familiar with the matter said. The sources declined to identify the reason. Cohen did not respond to messages seeking comment.
Though the Treasury is filling its lower-level positions, the thin ranks on the senior levels are taking a toll on the department's ability to deal with a financial crisis that continues to deepen in scope and complexity, government and industry officials say.
Gus O'Donnell, Cabinet Secretary for the British government, was quoted this week in British news reports saying it has been "unbelievably difficult" to talk to people at the U.S. Treasury: "There is nobody there.""
If Obama and Geithner can't even run a decent Treasury Department, why would any sane person trust them to run a trillion dollar economy?
Posted by: Inconvenient Truth | March 13, 2009 2:06 PM
For the last two decades, the Republicans have steadily purged themselves of all moderates, of anyone who did not toe the party line, of anyone who did not support the party leaders with every fiber of their being. Under leaders like Tom DeLay and a dozen other of the top far-right powerbrokers, apostasy was ruthlessly punished. Moderates were primaried out, the religiously or socially tolerant were excoriated, the legislatively balanced were forced from their positions -- all in service to a supposed permanent ideological governance, one that valued ideological purity over all else. Over knowledge, over experience, over common sense, over the very fabric of the law -- the ideology of hard-right conservatism trumped it all. Toe the line, and you were granted jobs in the administration, or positions of leadership in Iraq, or plum committee assignments. Voice disapproval -- you were nothing. You woke up the next morning to a White House Press Secretary declaring that you were a disgruntled brat, one with emotional or mental impairments that were responsible for your pitiable desertion.
After twenty years of purging, all the Republicans have left is that hard-right extreme. They shoved everyone else out willingly: it seems hardly surprising that now, faced with the fruits of it all, they are finding that all constituencies of the nation that they sought to condemn, belittle or purge are no longer interested in supporting them now.
I have no particular interest in them learning this lesson, of course. As far as I am concerned the last thirty years have proven modern conservatism to be not just ill conceived, but paranoid, divisive, willfully incompetent, obtusely premised, and in sum utterly valueless to the nation -- a waste of political oxygen. Something to be burned at the stake, and the ashes scattered, never to be heard from again.
But I expect they will, in the next years, at least try to retool their party into one that at least pretends to be more tolerant of, well, anyone not fully immersed in the notion that Ayn Rand and James Dobson rule the universe. The coming bloodshed between the two factions -- conservative true believers who can look at the last eight years and see absolutely nothing worth doing differently, nothing but a smashing but sadly misunderstood success, VS those that truly wish to temper the party in an effort to regain at least some semblance of their former power, is going to be a sight to behold. - Pass The Popcorn!
Posted by: Biff | March 13, 2009 2:29 PM
This is an investment in the country which will produce jobs, make us more energy efficient, wean us away from oil, improve the environment, and rebuild our largely neglected infrastructure.
Quite different from the trillions of tax dollars just handed over to Bush & Cheney's cronies in the oil business, defense industry, etc., Wall Street, etc.
Just imagine if Bush had succeeded in "privatizing" social security! Wanted to hand that over to his Wall Street buddies too!
Where have you been the last eight years when this has been occurring??? As one congressperson put it: the people who drove us into this ditch are now complaining about the size of the tow truck!!
Posted by: just sayin' | March 13, 2009 2:48 PM
Ask a Republican how to deal with a recession, and you would be safe in betting your life against a steak dinner they will not ask for specifics before laying out their prescription: Cut upper-income and corporate taxes and reduce public spending. They will not ask or state what current rates are, what they are relative to other rates, nor what they should be, because that information - the facts of the situation - has no bearing on their thinking. What counts is the act of cutting, which they regard as an expression of a moral principle.
Ask them how to deal with sluggish growth, or even how to encourage an already-booming economy, and their response will be no different: Cut upper-income and corporate taxes, and cut public spending. Iterate the question through as many different permutations as you please, the result will be the same - their "solution" is fixed in stone. To a rational person it becomes rapidly apparent that the GOP isn't playing with a full deck, but the problem goes much deeper than Republicans being Beavis-like creatures with a single response to everything: They do not even agree with the literal definitions of the nouns in the question, like "economy," nor do they even agree with the unstated assumption that the purpose of economics is to increase general prosperity.
This fact is easily illustrated by asking a simple question: What should be done if these tax rates and social spending are already zero? While some will equivocate, eventually you will get their honest response to that set of circumstances: Under those conditions, there is no problem to be solved.
Got that? If the taxes of the wealthy and corporations are zero, and no public money is spent (or "redistributed") on social programs, then there cannot be an economic problem by definition. Or, at least, they will claim that any problems which do exist are to be blamed on their victims, and thus by default there is nothing wrong with "the economy." If ten million people were homeless and starving, and the National Guard was in the streets to quell food riots, but the tax and spending situation were as they suggest, they would regard the situation as ideal and recognize no problem. This leads one then to question exactly what these maniacs think an "economy" is, and what they regard its purpose to be.
From countless conversations with Republicans, I believe I can say this with all confidence: They do not regard markets as tools to benefit society, but as magical beings or divinities whom mere humans live to serve, and whom governments exist solely to protect from "interference" by democracy, social activism, or unionization. It is these entities they regard to hold not only national sovereignty, but to define moral virtue.
Posted by: Inconvenient Facts | March 13, 2009 3:02 PM
Inconvenient truth, your analogy is inaccurate. The problem is too much public debt, private and governmental debt relative to GDP were not at record levels. Your analogy should be it is like curing a heroine adict by giving him methadone. It does not "cure" the problem but it does allow the patient to be functional.
In fact the analogy I am using is exactly what the government is trying. Neither you nor I know enough about economics to say whether it will work. However if it does, like a person on methadone the administration will try to wean the country off the current high level of debt.
The implication that Obama's economic team is stupid reflects poorly on your ability to access intellegence
Posted by: Ron M | March 13, 2009 3:12 PM
"Biff", you've already posted the above--on Nov. 9 and Nov. 28th--under different names. And in the Washington Post.
If you're going to rant, can't you at least come up with original rant?
Posted by: Bruce | March 13, 2009 3:38 PM
Larry,
.
Just spend away, the grandkids are picking up the tab
Posted by: Terry | March 13, 2009 11:34 PM
Read the following, from Don Surber:
"Barack Obama is too busy posing for magazine covers to actually do the job to which he was elected.
There is a price to be paid when a president throws a party every other night, weekends in Chicago or Camp David and poses for magazine cover after magazine cover.
After 51 days in office, Barack Obama has appointed only 73 people to 1,200 jobs that require Senate confirmation.
If they require Senate approval, they are important jobs.
But Obama is too busy to properly vet the people and appoint them to fill the jobs to get the work done.
That is his job.
And he shirks it.
And now we pay the price.
The London Independent reported: "Last week, it was all smiles and handshakes as Gordon Brown and President Barack Obama put on a show of unity in Washington.
"But yesterday, Sir Gus O'Donnell, Britain's most senior civil servant, exposed transatlantic tension when he protested that Downing Street was finding it 'unbelievably difficult' to plan for next month's G20 summit in London because of problems tracking down senior figures in the US administration. 'There is nobody there. You cannot believe how difficult it is,' the Cabinet Secretary told a civil service conference in Gateshead."
The Times of London and other newspapers had similar accounts."
73. of 1200. Incompetence You Can Believe In.
Posted by: Inconvenient Truth | March 14, 2009 9:25 AM