‘Obama knew little economics, however, and he took the word of the orthodox…’


From London Review of Books:

Of all Obama’s appointments, the most damaging to his credibility with liberal supporters were Lawrence Summers and Timothy Geithner, the chief economic adviser and the secretary of the treasury. Geithner has the air of a perpetual young man looking out for the interests of older men: an errand boy. The older men in question are the CEOs of Goldman Sachs, AIG, and the big banks and money firms. Geithner at the New York Fed had enforced – or, rather, let flow – the permissive policy on mortgages that Summers pushed through in the last years of the Clinton presidency. Summers himself, renowned for his aggression and brilliance, came too highly recommended for Obama not to appoint him. The new president credited his adviser’s belief that there were only a few persons in America who could undo the harm of the mortgage crisis, and it happened that they were the very people who had caused the crisis. The Obama economic team, with its ‘deep bench’ of Goldman Sachs executives, might have done better if mixed with economists of other views like Joseph Stiglitz and Paul Krugman. Obama knew little economics, however, and he took the word of the orthodox. It would have been wiser, from a merely prudential standpoint, to consult Summers behind a screen. But Obama has always craved legitimacy in a conspicuous form.

He is a president who does not like to be a bringer of bad news – unlike, say, Nixon or the younger Bush. It is a trait ill suited to the occasion, for Obama entered office at a bad time, and the first two years of his presidency have been unlucky. Afghanistan fell to pieces in his first months in office, and the return of public trust and consumer spending has come more slowly than expected. But Obama wanted to have what would look like achievements. His generalised desire seems to have been more important to him than any specific achievement. He surprised his supporters by making healthcare his first initiative. A recent story by Ryan Lizza in the New Yorker showed that in the first days of his presidency, his staff debated whether to go first after healthcare or global warming (euphemistically renamed ‘climate change’). They threw both ideas against the wall, Lizza wrote, to see which would stick in Congress, and healthcare won out. Obama then shifted gear and acted as if he had been the healthcare candidate all along. His love of fame – to occupy the central place but also to perform the shining deed – is greater than anyone had estimated. Yet his political instincts turn out to be weak. A recent blog by William Galston at the New Republic pointed out that when in spring 2009 he approved the bonuses for the bankers who had destroyed the economy in 2008, he did so without any sense that the rewards could disgust anyone. He was simply following the advice of Summers and Geithner.

Here the charge of elitism against Obama finds some basis in fact. He shares with his economic advisers the view that wealth is created by the banks and money firms from the top down: a healthy economy comes from money making money, not from people making things.

“The Fastidious President”, David Bromwich, London Review of Books