On the one hand, a lot of tea leaf watchers had expected Larry Summers to leave the Administration economic team for some time. Summers clearly wanted a bigger job, and the only jobs big enough to satisfy his rather large ego were Fed chairman (the one he really wanted) or Treasury chief. When it was clear Bernanke would be reappointed, some wags anticipated that Summers would take his leave shortly thereafter. Perhaps he hoped to get Geithner’s job (there has been off and on speculation that he would leave after the mid-term elections) but the most plausible explanation comes from Martin Wolf, who has know Summers for a long time. His take was that Larry loved being close to the action, and would stick with what he considered to be too small a role for longer than most expected. (The Wall Street Journal has a good recap of his tenure with the Obama Administration)
As much as some will be pleased to see Larry gone (he was a leading advocate of bank-friendly policies), his replacement is certain not to represent a change in philosophy. In fact, one of the ideas being mooted is to install an “ambassador” the business community because it is allegedly up in arms with Obama. Huh? The last thing Obama, who has been astonishingly accommodating to corporate interests, needs to do is signal weakness. But he has made the cardinal mistake of trying to please everyone and has succeeded in having no one happy with his policies. Past Presidents whose policies rankled special interests, such as Roosevelt, Johnson, and Reagan, were tenacious and not ruffled by noise. Obama, by contrast, announces bold-sounding initiatives, and any real change will break eggs and alienate some parties, then retreats. So he creates opponents, yet fails to deliver for his allies.
The interesting bit is Geithner’s quiet expansion of his role, which reportedly extends beyond the reach typical for the Treasury secretary into broad economic policy matters. Summers and Geithner came to the Administration as allies, and Summers was perceived to be an adept bureaucratic infighter. Yet Geithner, who at the outset looked terribly wobbly and was perceived to have such a bad public image that the Administration did a makeover for him for him (remember the Vogue story and the grocery store visit?) sails on seemingly above this fray. The speculation has long been that he would not stay much beyond the mid-terms, but that looks like a far less sure bet than it did a few months ago.
I assume Summers has left to start a promising new career as a “gender sensitivity consultant”.
Or maybe goodwill ambassador to Africa?
Larry Summers’ War Against the Earth
“DATE: December 12, 1991
“FR: Lawrence H. Summers
“‘Dirty’ Industries: Just between you and me, shouldn’t the World Bank be encouraging MORE migration of the dirty industries to the LDCs [Less Developed Countries]? I can think of three reasons:
“1) The measurements of the costs of health impairing pollution depends on the foregone earnings from increased morbidity and mortality. From this point of view a given amount of health impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.
“2) The costs of pollution are likely to be non-linear as the initial increments of pollution probably have very low cost. I’ve always though that under-populated countries in Africa are vastly UNDER-polluted, their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City. Only the lamentable facts that so much pollution is generated by non-tradable industries (transport, electrical generation) and that the unit transport costs of solid waste are so high prevent world welfare enhancing trade in air pollution and waste.
“3) The demand for a clean environment for aesthetic and health reasons is likely to have very high income elasticity. The concern over an agent that causes a one in a million change in the odds of prostrate cancer is obviously going to be much higher in a country where people survive to get prostrate cancer than in a country where under 5 mortality is is 200 per thousand. Also, much of the concern over industrial atmosphere discharge is about visibility impairing particulates. These discharges may have very little direct health impact. Clearly trade in goods that embody aesthetic pollution concerns could be welfare enhancing. While production is mobile the consumption of pretty air is a non-tradable.
“The problem with the arguments against all of these proposals for more pollution in LDCs (intrinsic rights to certain goods, moral reasons, social concerns, lack of adequate markets, etc.) could be turned around and used more or less effectively against every Bank proposal for liberalization.”
Here’s some appropriate commentary:
After the memo became public in February 1992, Brazil’s then-Secretary of the Environment Jose Lutzenburger wrote back to Summers: “Your reasoning is perfectly logical but totally insane… Your thoughts [provide] a concrete example of the unbelievable alienation, reductionist thinking, social ruthlessness and the arrogant ignorance of many conventional ‘economists’ concerning the nature of the world we live in… If the World Bank keeps you as vice president it will lose all credibility. To me it would confirm what I often said… the best thing that could happen would be for the Bank to disappear.”
Unfortunately we know whose psychopathic logic has been winning since then. Obama represents its ultimate triumph to date.
Thank you for this important post. Summers’ letter reads like classic SNL satire. Frankly, I’m surprised it survived the revisionist Ministry of Truth. Thank God for these here ‘intertubes’ (at least for now).
“…perfectly logical but totally insane…[breathtaking] arrogant ignorance” aptly captures such a clinically sociopathic, neoclassical mindset. It’s important that people understand this; one cannot appeal to it or appease it. It is the impenetrable mentality of a cultist, now deeply rooted in the Amerian psyche.
He can’t be any worse as a “gender sensitivity consultant” than as an economic adviser. If anyone is aware of any major financial issue on which Larry “Genyus” Summers has ever been right, please let me know. From his advocacy of economic shock therapy for the Eastern Bloc in the 1990’s, which almost lead to the Communists being voted back in, to his advocacy of the “strong dollar” and support of financial deregulation, to his investment advice for Harvard, the guy has been wrong about everything. But IOIYAAG (it’s ok if you are a genyus).
I totally agree with that. But in his favor, at least he thinks real business cycle theory is bullshit.
Hey, how much more can he do? The taxpayers have been bleed white, and Wall St has been enriched beyond their wildest dreams. It’s time for him to take his chips, cash them in for a couple billion in Wall St bailout loot, and get the hell out of Dodge before the wheels fall off the world economy.
As for a “business friendly” replacement, if we don’t get someone who puts Main St ahead of Wall St, and the middle class ahead of corporations, I, a life time Democratic voter, will financially and with my time support Republicans to get Obama impeached for whatever silly charge we can hang on him.
Geithner need to go too. His failure to do anything while this pile of corruption built up in NY is eye opening, His shenanigans during the AIG bailout are astonishing.
The midterms are going to be a bloodbath — he wanted to announce now so that it doesn’t look like he’s being PUSHED out as the Obama administration contemplates what it has wrought. He has said that he won’t leave until after the midterms – by which point, it will be entirely too late to save the Democratic party.
The failings are Obama’s – the blame must lie there. But when the history of this idiocy is finally written, I think that Larry’s greasy fingerprints will be noted all over what went wrong with the economic policies of this administration. Clearly, he breaks all his toys.
The last thing Obama, who has been astonishingly accommodating to corporate interests, needs to do is signal weakness. But he has made the cardinal mistake of trying to please everyone and has succeeded in having no one happy with his policies. Past Presidents whose policies rankled special interests, such as Roosevelt, Johnson, and Reagan, were tenacious and not ruffled by noise. Obama, by contrast, announces bold-sounding initiatives, and any real change will break eggs and alienate some parties, then retreats. So he creates opponents, yet fails to deliver for his allies.
Good summation of how Obama, although just as malevolent as Cheney in ideology and intent, is cowardly and incompetent in execution, and in spite of his alleged book smarts, basically stupid where it comes to street smarts.
I find it absurd that some people have any doubts that this administration has delivered for its allies. ARRA was replete with lots of funds for its allies – often to the detriement of its stimulative capacity. Its intervention in the auto bankruptcies was exceptionally favorable to the UAW. Health care reform has been passed in an imperfect form, but any sensible person expects this will the the work of decades anyway. I seem to remember that additional aid to states did pass, as did repeated extensions of unemployment insurance. As for card-check and cap and trade, well health care and financial reforn took up a tremendous amount of congressional time and energy. Sure, a lot of people’s hopes for change have not been fully met, but for a guy who really was as inexperienced as his critics pointed out in 2008, he hasn’t done so bad. If you wanted experienced leadership, Clinton was right there.
Look closely enough at look at Obama’s so-called accomplishments, and they turn out to be Trojan horse stealth weapons of Wall Street, both FinReg and Sickcare—hence the latter’s secret drug deals, the easy capitulation on the public option (tsk, tsk ‘only’ 59 votes), and individual mandates (contrary to his campaign pledges).
In fact, although you’d think they’d wait a year or two for effect, insurers have already raised rates dramatically (up to 30% in CA), and now, they’re even denying coverage to kids, despite informal “assurances” to Obama.
“Surprise! Private Insurers Skirt New Health Care Law
by Jon Walker http://www.commondreams.org/view/2010/09/22-6
“Democrats were extra proud when they put a requirement that insurance companies cover children with pre-existing conditions in their new health care law. Now, I bet the CEOs at the country’s largest for-profit insurance companies are even more proud of themselves for easily finding a way around this regulation: simply stop offering child-only policies. From the Denver Post:”
“‘At least six major companies — including Anthem, Aetna, Cigna and Humana — have said they will stop writing new policies for individual children not covered by their parents’ or other plans, insurance officials said.'”
“‘They blamed health reform mandates taking effect Thursday requiring companies that write such policies as of that date to also cover sick children up to age 19.'”
“Of course, President Obama and the rest of the Democrats have already begun pretending to shake their fists in anger at the insurance companies for being evil and putting profits over people. From the Washington Post:”
“‘But officials of the Obama administration said the move contradicted a letter from the leader of one of the insurance industry’s most important trade groups after the law’s adoption in March…'”
“Frankly, the complaining from Obama is just sad. Either it is hollow grandstanding, or Obama actually thought that the private, for-profit health insurance companies were honest brokers he could trust to not try to find loopholes in the new regulations. If it is the latter, President Obama’s much-touted intellect needs a reevaluation.”
It’s time to stop giving Obama the benefit of doubt as a well-meaning fool or well-intentioned bungler. Given his brain trust advisors—shrewd Chicago pol, Emanuel, Rubinomics insiders, and militarists Gates, Biden and Clinton—as well as his now long record of Progressive betrayals, he ran out of excuses a long time ago.
I find it absurd that some people have any doubts that this administration has delivered for its allies.
Yes, it has – the banks, the insurance rackets, the weapons peddlers, and warmengers, politce statists, and sadists everyewhere.
Health care reform has been passed in an imperfect form, but any sensible person expects this will the the work of decades anyway.
No, “reform” was gutted. They passed an insurance racket bailout and an extortion mandate, a poll tax for the benefit of the gangsters.
Any sensible person knows that’s all the bill will ever do, while the mafia “protection” it forces one to buy is worthless.
Any senseible person knows that single payer is refrom, abn that by definition anything else is not reform. And any sensible person knows that if everyone who claimed to want reform had simply demanded single payer and stuck with that reform, we’d have had it easily.
But the vast majority who claimed to want reform were either lying or too cowardly to fight, which is just another kind of lie.
Keep spewing your lies, hack. Your kind is finished once and for all. Notice how your political island gets tinier by the day? How the ever more turbulent seas are lopping off chunks every day? How in any direction you look a tsunami threatens which will wipe you out completely?
“The last thing Obama, who has been astonishingly accommodating to corporate interests, needs to do is signal weakness.”
Are you kidding? Have you talked to anyone in the business community in the last year? Have you read any editorials by businesspeople? Have you listened to small business owners’ reactions and thoughts to the onerous healthcare regulation that looms on the horizon? Did you know the financial regulatory bill is 2,200 pages long and is a veritable all-you-can eat buffet for lawyers?
Ignorant, partisan, and closed-minded is no way to go through life Yves.
Yves is talking about actual facts, not perception. Also, she is referencing how Obama was accommodating to BIG BUSINESS, not small business. It cannot be denied that Obama was extremely accommodating to the big banks.
You’ve just told me you believe Chamber of Commerce and Business Roundtable propaganda. I’ve written extensively here on how the financial reform and health care bills are corporate friendly, with specific details. Business is adopting the same policies of the right generally: they are going for total victory, and are making a grossly disproportionate stink about changes that will at most inconvenience them only around the margin. Were you not even paying attenion? The health care bill enriches big pharma and the health insures, and further entrenches the problematic role of health insurers.
And how is attacking Obama partisan? If I were partisan, I’d be taking the Democrat party line and defending him.
Maybe his leaving has to do with Harvard’s recent announcement of an 11% increase in their endowment. Summers may feel he can safely return to his old academic job now that the school he almost managed into the ground doesn’t have to sell off any more assets to save it’s ivy-covered a$$.
Obama is pro-big business and his policies and very much favored the large players, but I think small businesses have a lot of beefs with him. Mainly on class warfare and the fact that his tax hikes will have a very strong effect on these type of people as opposed to corporates their shareholders who are only getting modests tax hikes.
Even then small businesses (Those with incomes over 250k to the low millions) would probably take his tax hikes better if it wasn’t packaged in such strong rhetoric that makes them feel like they are doing something wrong making a buck or that their profits are really the governments money.
Now the likes of the General Electrics and Goldman Sachs of the world have nothing to complain about.
The fraction of truly small businesses with income north of $250K is very very small.
The ones that matter and create jobs all have incomes over $250k…nobody gives a shit about someone selling jewelery on EBAY. The big job numbers created are in the ones attaining scale and those all have incomes about 250k and use income to invest in the business.
Hot dog stand type businesses with a couple employees making small money may be the majority of small businesses, but the ones that create high paying good jobs at scale will be hit very heavily by these taxes. They aren’t the big corporate jobs and they aren’t the micro businesses they are the in between that dominate hiring.
We do actually care about job creators right?
“The big job numbers created are in the ones attaining scale and those all have incomes about 250k and use income to invest in the business.”
Are you talking about income from the business and then reinvested in the business?
Unless the tax laws in the USA are really different from those in Germany the solution should be easy?
Leave that money in the company and reinvest it.
It might even be tax deductible?
Taking it out of the company (as part of my income), taxed at my income tax rate, and then reinvesting it in the company sounds stupid? My tax accountant would kill me. :)
I’m sorry, but this is preposterous. I know of no evidence that the marginal rate on individuals for *income* tax affects investment in small businesses. I have multiple small businesses and make over $250k. I invest more when there is return to be made. Especially at the very minor marginal rate increases we are discussing, how could this affect my decision making? Are you seriously suggesting that confiscating an extra three percent of my income is going to make me not seek the highest returns for my dollars? It doesn’t make any sense. It may lead me to choose more leisure time, but there is no evidence at all that having the top 1% choose more leisure time can have *any* effect on overall productivity. This kind of misinformation is really lamentable.
Anyway, on top of the poor analysis of how *income* taxes affect investment decisions, resource distribution may be an even more important criterion for a voter than spurring small business investment. Read up on relative consumption and find out what really seems to make people tick…
What rubbish. Hiking the bush cuts on top incomes will raise very little money. Its expected to costs 700 billion on static analysis in reality they will effect growth and people like me will move income into more efficient taxable behavior. They will likely raise less than half the 700 billion and lead to higher unemployment and slower growth.
I’m personally going to cut back on consumption next year to hurt demand and a lot of people with high incomes are in that camp. No more frivolous spending instead I will invest more in other countries that respect capital.
As yves has posted if people think they are getting screwed they will change their behavior even if it is bad for them personally. I think I’m getting screwed I’m doing whatever i can to hurt domestic growth.
But yes these tax hikes will cause a problem for small businesses. For one many are funded by mid-career professional with significant income. They will have less income to invest in start-ups think Doctors etc. Also that young professional crowd lawyers, doctors, etc will think hard about that extra billable hour if they only get half their pay after state, federal taxes etc.
Your maximum return shit is bogus, nothing is guaranteed and when you get a higher marginal rate and share less in the upside then you gain a preference for lower risks investments. Why take risks when you have to share the profits and take the losses. I’d rather go to something tax efficient like gold and silver which can be passed on to heirs tax free.
Sean, if you can cool down long enough to refocus, see “Tax Cuts: Myths and Realities” by the Center on Budget and Policy Priorities. It clearly debunks eight myths including yours. http://www.cbpp.org/cms/?fa=view&id=692
Also: “The Skewed Benefits of the Tax Cuts: With the Tax Cuts Extended, Top 1 Percent of Households Would Receive Almost $1.2 Trillion in Tax Benefits Over the Next Decade” http://www.cbpp.org/cms/?fa=view&id=1146
And recent Yves’ NC post: “New Studies Debunk Idea that Ending Tax Cuts on Wealthy Hurts Small Businesses” Quoting NYT:
“But much of the research over the last two decades has found that increases in top tax rates can lead to an increase in the formation of small businesses, as wealthy individuals apparently begin start-ups to avail themselves of the more generous tax breaks offered to businesses.”
“Higher taxes may lead individuals to seek self-employment because the opportunities for tax evasion and avoidance are greater,” according to a report released this month by the nonpartisan Congressional Research Service, which surveyed more than 20 studies on the effects of taxes on hiring.”
We do actually care about job creators right?
Yes. The job creators are of course one and the same with those who do the work. Trickle down elitism is a lie in every single one of its many forms. The will to work and access to the means of production is the definition of job creation.
That means we should get rid of the criminal parasites you’re talking about.
Why should he care about rinkydink small businesses like you? Did you pony up your bundled 7-figure contribution yet? No? Then shut up and fry more donuts. You small business dupes are the corporate equivalent of teabaggers, parroting the Chamber of Commerce slogans and getting crushed by the oligopolistic policies that result.
Clearly you attended the Larry Summers School of Diplomacy. And yet you are right on every count.
I’ve read a lot of speculation about why Summers would leave, and the only story I find most compelling is that he’s part of a general exodus of the Clintonites. If Rahm is installed as Mayor of Chicago, then Summers loses his strongest ally against the other real faction, the Axelrod camp.
But as the Clintonite corporatists flee, what the heck is even left? The liberals have been ground into a fine pulp by Beck and others. There really isn’t all that much else to this Administration. President Obama is, IMHO, pretty disinterested in actually being President, as much as he clearly loved the campaign.
I’m thrilled that Summers is gone. I loudly complained here when he was announced. The question of what comes now plagues me, though, as this feels like 2.5 years of lame duckiness, and I can’t believe that paralysis is inherently good.
“The liberals have been ground into a fine pulp by Beck and others.”
Ooh, big mouthed assholes have said mean things about them. Mommy!
If you’re doing a good job there will always be vicious critics. In fact there will be vicious critics no matter what. So ignore them and stop pretending this is beanbag. If you try to be all things to all people you’ll be nothing to anybody. Pick a stand and stick to it. Not only is it the only way to get anything done, but voters respect it.
When I heard Summers was leaving, I immediately thought of the mug that says, “Chaos, panic and disorder. My work here is done.”
The battles that may have taken up the most critical resources of time and clout may be tapering off. Woodward’s new book would indicate that after the pull out of Iraq, Afghanistan may too become a forgotten conflict with a massive withdrawal after declaring a measure of victory. We’ll know for sure in July 2011. It seems to me the firing of Gen McChystal is of more importance based on the life and death struggles over escalation and remaining in those 2 hellholes. If Obama can fire a General of his stature, he did head up joint special operations command 2003-2008, think of him as the czar of darkness, watching Summers, Emmanuel, Rohmer, Orzig go, makes sense in view of the economic disaster that is still not getting adequate results in terms of job creation or much else. If Obama wanted these people to stay on, they would not be allowed to leave. A lot of generals tend to get fired until you can find a US Grant that starts to win. Liz Warren looks like a last man standing compared to those that are”getting off likes rats from a sinking ship” meme. The proof could not be clearer. Quitter or forced out, they will be gone and those that stay will make and fight for whatever policies will be made. I say, look for more attention to be paid to the butter issues with less and less distractions from the guns side of the equation.
Man oh man, I hope you’re right.
At Harvard, you lose your tenure if you’re absent for more than 2 years. Under normal circumstances, someone who left for longer than that, to be economic advisor to POTUS, would be quite assured of a quick faculty vote to re-grant his tenure upon return. But this is Larry Summers. He would not win that vote.
Anne Mulcahy of Xerox to replace Summers?
Mulcahy joined Xerox as a field sales representative in 1976 and rose through the ranks. From 1992-1995, Mulcahy was vice president for human resources, responsible for compensation, benefits, human resource strategy, labor relations, management development and employee training. Mulcahy became chief staff officer in 1997 and corporate senior vice president in 1998. Prior to that, she served as vice president and staff officer for Customer Operations, covering South America and Central America, Europe, Asia, Africa, and China.
Hmmmm. My calendar says the 23’d is the beginning of Autumn, so this article is posted on the last day of Summer(s).
Summers-Geithner has been replaced by Goolsbee-Geithner. The person that replaces Summers will probably have less access and influence. So much so that it may be a somewhat ceremonial role. Hence the notion of bringing in an economist with experience in business (there’s no non-finance business person on the senior team, I believe).
Goolsbee-Geithner looks to be more of the same with a bit more willingness to bend to political realities in an effort to get Obama elected in 2012. I’d bet, for example, that Summers has not been supportive of Obama’s wish to see the Bush tax cuts expire for the wealthiest.
Summers is a goon and a failure at everything but self promotion, it has always been clear even back in the Billary days.
The position is ceremonial and if Obama had a lick of sense he would appoint some far left union lackey to the post and be done with it.
The only way he “wins” in 2012 is a bloody 40-40-20 type of election. He needs to forget the jobs jobs deal, that’s over for now and work on the optics toward his base if he still has one.
That’s all he has now.
Warren to Obama (?): “Either dump the chauvinist mysogynist, or I’m outta here! I can’t breathe the same air as the mouth-breather who steamrolled Brooksley Born and gutted the Harvard endowment.” (just a thought)
But nobody panic; undoubtedly another fox will be appointed to the henhouse.
At last, it’s Summers Fall. Perhaps the Winter of our economic discontent will soon be over. Or at least a little more over.
The economy will now probably Spring forward into prosperity due to his departure.
Let us pray.
So Summers didn’t get the Fed or Treasury and his ego is forcing him to leave to take up the exulted position of professor at Harvard, the school where he was once president and where he is still loved after nearly driving it into the ground financially? Yeah, that scans. I think he is such an unmitigated asshole that it finally got to even Rahm and Obama. Now they are using his departure to suck up to the corporatocracy/kleptocracy even more. Mirabile dictu, indeed. In general, if it is not policy, then it’s personal, but that can run both ways.
I’ve gone back and forth on this and I’ve come to the conclusion that with Orszag, Romer, and Summers this is standard getting out while the getting is good. They were all as far as they could get. They leave now and they can use the cachet of their recent connections to the Administration to parlay nice perks and positions. They stay much longer and it’s all downsides. The economic train wreck that is coming happens and their brand is tarnished forever. Or if they stay into 2011 they get caught in the 2012 election cycle and can’t leave without raising some questions, and some rancor, from the Administration they are trying to draft off. And maybe, just maybe, it has penetrated in however dim a fashion that Obama is not going to be President in 2013. There will be no second term. They will have stayed on for nothing.
The idea they would do it “for the country” is, of course, ludicrous. These are hacks and hasbeens and I doubt they have ever counted beyond Numero Uno in their lives.
My initial comment seems to have disappeared. People, like Orszag, Summers, and Romer are getting out now, because if they don’t they could find themselves roped into staying past the 2012 election, and some of them may have begun to entertain the possibility that Obama will be a one-termer.
All of them had gone as far as they could go in this Administration. They aren’t beset by any quixotic notions that what they have been doing is for the good of the country, i.e. our country. So why not cash in now while their connections to this Administration are still seen as a positive?
Sure going back to Harvard as professor is a big step down for Summers. Afterall he was a terrible president there and nearly drove the place into the ground. I expect a lot of faculty hate his guts. But there’s still the salary and pension to think of, likely a few slimey hedge funds that will pay him to sit on there board, and speaking fees, or deferred bribes to be more accurate, to collect.
Well, I don’t know much about Harvard, Drew Faust won’t remember me, but it seems that if Larry Summers urinal disinfectant discs were sold on this site, Yves could make a pretty penny.
Addition by subtraction, although with Tim Geithner and Alan Goolsbee still on board, I think one can safely say the Obama administration is still a captive of Rubinomics. I am sure Larry wanted to be Chairman of the Federal Reserve, but he was unconfirmable, as even many liberal Democrats would have gaged on based on his gender comments and his closeness to Wall Street. I probably don’t have as negative judgement about the Obama administration as most on this blog have (exactly what magical policies would have made things so much better now if they had been followed? A bigger stimulus would have made things marginally better, WPA/VISTA/America Corps/ CCC job program made have definitely helped the morale of the poor and working class, and nationalizing Citi and Bank of America would certainly have been just. But frankly, the economy would still suck as to many millions of Americans, like me, are pulling their horns in, saving money and paying off debt, especially the mortgage debt on our “underwater” homes. And politically, given the Village’s Right of Centeredness and loathing for the great unwash, I doubt such programs would have been passable in the Spring of 2009.