Why Are Obama’s Former Economic Advisors Still Offering Advice?
A couple of weeks ago it was Christina Romer, now it’s Larry Summers:
In an opinion piece published by Reuters on Sunday, Summers — a Harvard professor and former Treasury secretary under President Bill Clinton — argued that it would be “premature” to withdraw fiscal support for the economy at the end of 2011.
First, it’s amazing to me that these people think that people want to hear what they have to say. Romer, of course, ignominiously offered up now comically off-base post-”stimulus” employment projection. Summers merely left behind a stream of gossip regarding both his arrogance and narcolepsy. Now, I could understand it if these characters felt they weren’t listened to and they still genuinely feel that they have good advice that wasn’t followed, and there have been some grumblings about the “political people” running all policy coming out of the White House, but that message does not accompany any of these missives from Romer, Summers, et al. Romer, especially, defended and continues to defend the $900 billion “stimulus” so she is not making the “they didn’t listen to me” argument. Neither is Summers, so it is curious why these people feel they ought to be listened to given the poor record of the Obama economy policy team.
Summers recent comments remind us exactly why it is that we should not be listening to him. While he calls for additional tax cuts (which I don’t mind because I abide by Milton Friedman’s advice regarding tax cuts) his prescription badly misdiagnoses what ails the economy.
Summers said the United States might have faced a double-dip recession if Obama had not agreed to a deal last year with congressional Republicans to extend unemployment insurance benefits and payroll tax cuts for workers.
The deal was part of a wider package that included an extension of Bush-era tax cuts for the wealthiest Americans.
“Fiscal support should be continued and indeed expanded by providing the payroll tax cut to employers as well as employees,” Summers wrote.
The payroll tax for employers would be OK I guess, but it falls short for two fundamental reasons. First, it would be temporary and thus have very little true incentive effects versus a permanent change. Second, as I’ve chronicled before, corporations are swimming in cash, they don’t really need the money; so a payroll tax cut for employers wouldn’t add anything to the economic picture that is currently missing. The mere suggestion indicates how clueless these guys are. As I’ve stated, rhetoric and regulation are the problems. The Obama administration has unleashed a policy agenda and a rhetorical assault on business the likes of which we have not seen in decades and our entrepreneurs, business decision-makers, and risk takers have all hidden under their desks. The jobs machine is on extended vacation thanks to crap like this (and this), not a shortage of money. I suspect that guys like Summers can’t or won’t admit this because it calls into question deep-seated personal and institutional beliefs about the criticality of the regulatory state that the left holds so fundamentally dear.Tags: lawrence summers, Obamanomics