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Thursday, July 25, 2024

No Summers Love-In: New Book Paints Unflattering Picture Of Summers


In a soon-to-be-released book about the inner workings and turmoil that dominated the Obama administration’s first two years in office, one figure emerges above the others as a source for dysfunction on economic policy.

Larry Summers does not earn a kind portrayal in Richard Wolffe’s upcoming “Revival: The Struggle for Survival Inside the Obama White House.” According to excerpts that were provided in advance to the Huffington Post, he is cast as manipulative and self-impressed and a routine source of frustration for a team of advisers grappling with a deep and difficult crisis. He fought with his colleagues over policy prescriptions both bold and routine and often played the roll of stop-gap to basic reforms.

Such adjectives have been ascribed to Summers in the past. But in reporting out his book, Wolffe presents some telling, new anecdotal evidence. Summers for one, predicted that his temperament would be a problem. When he was brought on board the administration he told Obama that management was not his strong suit.

“[I]f what he wanted was the most harmonious management of the paper flow,” Summers tells Wolffe, “I wasn’t probably the right person. But if he wanted all positions represented with open debate, I felt I could make sure I would be able to help him in that regard.”

Obama hired him anyway, finding his familiarity with Washington and his unquestioned brilliance on economic policy alluring assets. On some issues, he and the president were aligned. Summers was a vocal advocate for a new consumer financial protection agency, a focal point of financial regulatory reform legislation. Treasury Secretary Timothy Geithner is the aide most skittish on that idea.

But more often then not, the team of economic advisers was operating from different playbooks, with Summers calling his plays the loudest. Take, for instance, the debate that surrounded the Volcker rule — the regulatory reform component that curtailed proprietary trading banking at U.S. banks and limited their investments in private equity firms and hedge funds. As Wolffe reports:

[Summers’] doubts sat there in the West Wing, blocking the Volcker rule for months. Obama had signaled that he wanted the rule to move forward back in October. The banks were on safe ground again, but could still benefit from subsidized lending by the federal government. That seemed wrong when they could use the money to trade for themselves rather than lend it to customers in the real economy… Biden was an old friend of Volcker’s and started to press for the rule to take force. But as the weeks dragged on, Summers rehashed his same old questions and concerns. At one fall meeting with his economics team in the Oval Office, Obama wanted to know why nothing had moved yet. Summers dug in once again, while Geithner – whose media coverage cast him as a supposed ally of Wall Street – wanted to push ahead. Obama noted dryly, “I think I can argue everyone’s position now.

This, as Wolffe notes, is different from the narrative that existed at the time, when Geithner was largely seen as the Volcker rule foil. It’s worth noting, moreover, that in separate reporting, senior administration officials stressed to the Huffington Post that on other issues (namely, capping discretionary spending) Summers was closely aligned with other members of the economic team, often with former OMB Director Peter Orszag as the outsider.

Former aides to Summers did not return a request for comment, but an economist who has worked with administration insisted that it would be wrong to categorize Summers as the consummate, arrogant outsider.

Nevertheless, Wolffe — whose sources in the White House are as good as any reporter — documents several other fractious moments from Summers’ tenure, including the internal debates over, what seemed at the time to be, non-controversial small business tax credits.

Summers liked to argue that he had backed the idea of a jobs tax credit in the first year of the presidency, but it failed to win much political support. So he was reluctant to see it return the following year as a major policy, not least because his conversations with business executives suggested there were practical problems in making it work. “In general the overall determinant of how many people businesses hire is how many people they need,” said Summers. “So I prefer to put emphasis on things like infrastructure that would affect the demand for products, which I thought was the particular determinant of hiring.”

Summers was squabbling with Christina Romer, whose academic credentials were hardly superficial: an economics professor at Berkeley and a specialist in the Great Depression. Romer began to build economic models of the tax credit to boost what little academic literature existed. Summers would often say he did not believe her arguments and models, demanding new tests and new assumptions. So Romer dutifully reworked the models and talked to outside economists who were just as skeptical as Summers. She found that many well-established economists were initially hostile, but would change their minds on hearing about her studies. Even if most of the jobs would have been created anyway, Romer found the fraction generated by the tax credit was still cheaper than the Recovery Act. Much of Romer’s work was designed to convince one man – Summers, not Obama – that her calculations made sense.

Perhaps the most illustrative anecdote on Summers’ domineering, however, involved a legislative area that clearly was not related to the economic council’s purview. Around the time that Obama entered office, an earth wall that had been built to hold back coal ash sludge in Knoxville, Tennessee collapsed. The Environmental Protection Agency wanted to treat coal ash as a hazardous waste. The coal industry argued that the costs it would face would be insurmountable if the EPA got its way. Summers agreed.

“It’s complicated, because EPA has the authority to do this and you don’t want political pressure telling them what to do,” said one senior West Wing aide. “But you have eight years of pent-up frustration in the EPA and they think they have finally got a chance to repair the damage.”

Rather than build support among his natural allies inside the White House, Summers attempted to control them. There was someone already tasked with the EPA cost-benefit analysis: Obama’s friend Cass Sunstein, a former University of Chicago Law School professor. His office was part of the White House budget apparatus under Peter Orszag, one Summers’ rivals. Summers won Obama’s approval to review the analysis, as he tried to barrel through the bureaucratic politics. But Orszag threatened to boycott the president’s briefing if Summers pushed ahead with the presentation – an extraordinary expression of the personal rivalries at the heart of Obama’s team, at a time when the economy was still struggling to emerge fully from recession. Summers concluded that the fault lay not with him…

From The Huffington Post