Friday, August 6, 2010

It's Larry Summers' World, We Just Live In It

The Larry Summers Experience continues:
Christina Romer, chairwoman of Pres. Obama's Council of Economic Advisers, has decided to resign, according to a source familiar with her plans.

Romer, an economics professor at the University of California (Berkeley) before taking the key admin post, did not respond to repeated calls to her office.

"She has been frustrated," a source with insight into the WH economics team said. "She doesn't feel that she has a direct line to the president. She would be giving different advice than Larry Summers [director of the National Economic Council], who does have a direct line to the president."
Christina Romer vs Larry Summers... hey, remember what their big fight was about?
Axelrod told me, “The basic message was that, if we didn’t act quickly to replace the output we were losing, unemployment could skyrocket.” Romer mentioned that employers had dropped more than half a million workers from the payrolls in November, the biggest cut in more than three decades. “The conditions are grim, and deteriorating rapidly,” she told the President.

The most important question facing Obama that day was how large the stimulus should be. Since the election, as the economy continued to worsen, the consensus among economists kept rising. A hundred-billion-dollar stimulus had seemed prudent earlier in the year. Congress now appeared receptive to something on the order of five hundred billion. Joseph Stiglitz, the Nobel laureate, was calling for a trillion. Romer had run simulations of the effects of stimulus packages of varying sizes: six hundred billion dollars, eight hundred billion dollars, and $1.2 trillion. The best estimate for the output gap was some two trillion dollars over 2009 and 2010. Because of the multiplier effect, filling that gap didn’t require two trillion dollars of government spending, but Romer’s analysis, deeply informed by her work on the Depression, suggested that the package should probably be more than $1.2 trillion. The memo to Obama, however, detailed only two packages: a five-hundred-and-fifty-billion-dollar stimulus and an eight-hundred-and-ninety-billion-dollar stimulus. Summers did not include Romer’s $1.2-trillion projection. The memo argued that the stimulus should not be used to fill the entire output gap; rather, it was “an insurance package against catastrophic failure.” At the meeting, according to one participant, “there was no serious discussion to going above a trillion dollars.”
Romer, ignored then, ignored now, leaves the administration.

Larry Summers, was wrong about everything before he was hired and dead wrong about the size of the stimulus. He keeps his job, and remains the one that has Obama's ear.

But why should being wrong matter to Larry Summers, he's fucked up his entire career, yet he always manages to fail upwards.

Heckuva job, Barack. Have fun defending the Summers Administration and 9% unemployment in 2012.

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