Chronicles of a Debt Foretold


But while the administration’s unemployment forecasts have since become more restrained, Team Obama always sees fat times just around the corner. In August 2009, the White House — after having a half year to view the economy and the initial impact of its $800 billion stimulus — made a laughably optimistic forecast: GDP would rise 4.3 percent in 2011 (it actually rose 1.7 percent), 4.3 percent in 2012 . . . and 4.3 percent in 2013, too! And 2014? 4.0 percent growth.

Then, in the 2010 Economic Report of the President — this was the year of Recovery Summer — the White House econ team predicted GDP growth of 4.3 percent in 2011, 4.3 percent in 2012, 4.2 percent in 2013, and 3.9 percent in 2014. In the 2011 report, the forecast was for 3.1 percent growth in 2011, 4.0 percent in 2012, 4.5 percent in 2013, and 4.2 percent in 2014. And in the most recent report — out just this past February — the forecast sees 3.0 percent growth this year, 3.0 percent next year, and 4.0 percent in 2014. The Obama economy: always recovering, never recovered.

So what went wrong? What continues to go wrong? Both Scheiber and Suskind are good liberals who — like the Obama economic team — really never bother to question the Keynesian solution at the core of Obamanomics. They just think the medicine wasn’t tried, at least not in a large enough dose. So the problem, as they see it, has not been policy as much as personnel — and not the king himself, but his feckless court. And there is perhaps no better example of Obama’s being ill served by his economic dream team than the internal White House battle over the 2009 stimulus package. As Suskind writes, “The effectiveness of stimulus spending was still considered the realm of unproven economics . . . [but inside] Team Obama there was almost no discussion of whether to undertake a stimulus, just of how large it ought to be.”

And many liberals think they lost that debate to the budget hawks and the politically timid, a defeat that — Scheiber and Suskind also argue — has discolored the entire Obama presidency and ruined the political case for further major stimulus to boost growth and create jobs. If only Obama had followed the advice of Romer, the U.C.-Berkeley professor who headed his Council of Economic Advisers, for a far bigger fiscal intervention, the path of the Obama presidency might look a lot different. In a memo that Scheiber got hold of, Romer argued that to really do the job, the stimulus — later called the American Recovery and Reinvestment Act — needed to be a whopping $1.8 trillion of spending, tax cuts, and aid to state and local governments spread over two years.

Enter the villain of the episode, Lawrence Summers, head of Obama’s National Economic Council and treasury secretary at the end of the Clinton administration. Suskind, in the most striking passage of Confidence Men: “He can frame arguments with such force and conviction that people think he knows more than he does. Instead of looking at a record pockmarked with bad decisions, people see his extemporaneous brilliance and let themselves be dazzled. Summers’s long career has come to look, more and more, like one long demonstration of the difference between wisdom and smarts.”

Summers told Romer that a $1.8 trillion stimulus was politically impracticable. So Romer came up with a compromise proposal offering three options: $1.2 trillion, $850 billion, and $600 billion. But before the memo could get to Obama and the political team — the latter already dubious about any stimulus amount over $1 trillion — Summers struck the priciest option. Scheiber: “Summers worried that urging more than this amount would stamp him and Romer as oblivious in [the political team’s] eyes. ‘$1.2 trillion is nonplanetary,’ he told Romer, invoking a Summers-ism for ‘ludicrous.’ ‘People will think we don’t get it.’”

April 16, 2012    |     Volume LXIV, No. 7

Books, Arts & Manners
The Long View  .  .  .  .  .  .  .  .  
Athwart  .  .  .  .  .  .  .  .  
Poetry  .  .  .  .  .  .  .  .  
Happy Warrior  .  .  .  .  .  .  .  .