There was a time (er, last week) when I was mocked for lamenting the influence of Obama’s top economic advisers on climate policy. I still think I’ll have the last laugh. Or cry, as the case may be.
This is from a story by David Cho, just out in the Washington Post, about the extraordinary influence of Summers and Geithner in the administration:
The influence of their partnership was also evident during the battle over the budget, which began weeks before Obama was sworn into office.
Meeting in January on the eighth floor of the transition team’s office in downtown Washington, Geithner pressed the incoming president to commit to cutting the deficit to 3 percent of the economy over the next five years, which would keep the nation’s debt roughly in line with normal economic growth. Summers quickly backed him.
Some, including economist Jared Bernstein, resisted, saying that such a strict limit would make it more difficult to confront the many challenges ahead and that the size of the government’s emergency response to the economy and financial markets would make the cap tough to maintain.
In February, the entire economic team convened in the windowless Roosevelt Room in the White House. Obama abruptly ended the debate. Geithner and Summers would have their way.
“The two of them being together ended up being pretty decisive for President Obama,” an administration official said.
Rubinite deficit hawkery is back! Super. Atrios dryly notes:
Jared Bernstein’s the crazy liberal who might want to spend a few bucks on social programs. Meanwhile Larry and Tim are shoveling cash into the Banksters’ pockets as fast as they can. But, you know, they’re the ones who are “serious” about the deficit.
Summers, you’ll recall, was credited with reducing the amount of infrastructure spending in the stimulus bill. Here’s what Bernstein had to say [PDF] before Congress last year, arguing for substantially higher infrastructure spending:
Three facts motivate this contention. First, as noted, American households are highly leveraged, and may well be poised for a period of enhanced savings and diminished consumption. In this context, public investment should be viewed as an important source of macro-economic stimulus and labor demand — the creation of new, often high-quality jobs — which is clearly lacking from our current labor market.
Second, there are deep needs for productivity-enhancing investments in public goods that will not be not made by any private entities, which, by definition, cannot capture the returns on public investments in roads, bridges, waste systems, water systems, schools, libraries, parks, etc. Third, climate change heightens the urgency of the need to make these investments with an eye towards the reduction of greenhouse gases and the conservation of energy resources.
Not to be reductive, but the deficit seems to me one of those concerns that exists primarily in the Beltway, and I wouldn’t be surprised if part of the argument that persuaded Obama to put it front and center had to do with the perception among Very Serious People that he’s taking it seriously. I can’t help thinking the dominance of deficit concerns in Beltway circles has something to do with the dynamic Matt describes:
A typical Sunday chat show will consist of a host who belongs to the top two percent reporting to a network executive who belongs to the top two percent, who reports to a conglomerate executive who belongs to the top two percent. Their livelihoods will depend on attracting advertising dollars that are controlled by other top two percenters, and if the host brings some pundits on to discuss things they’ll be from the top two percent. Thus do the delicate sensibilities of the two percent or so of households earning more than $250,000 a year wind up getting equal weight — or more! — to those of the overwhelming majority of households that earn less than $100,000 a year.
I’m not (oy) saying “economics is evil.” In fact I heartily endorse the work of economist James Galbraith, who gave this answer to the National Journal question, “Is The Deficit A Threat To A Future Recovery?“
No. The question is grossly misconceived. Right now and for the immediate future, the budget deficit is the only source of demand that can fuel a recovery. Our present problem is not that it is too big, but that
it is too small. Far too small.
Nor do I mean to entirely demonize Summers and Geithner, who are smart guys who did, after all, just sign off on an extraordinarily progressive (relative to recent U.S. policy) stimulus bill and budget proposal. But they have biases: they vastly prefer financial to fiscal policy; they believe this will be a U-shaped recession after which “normal” growth will merrily resume (why else would they advocate hard deficit targets?); they believe emission reduction policy is a net drag on the economy; they prioritize balanced budgets over public investments. All these biases work against good climate/energy policy.