Larry Summers, in retrospect

Not really any surprises in Peter Baker's article on the White House economic team. Still slightly annoying that reappointing Bernanke and waiting so long to fill the Fed vacancies doesn't register at all, much less as clear and critical mistakes. Always breathtaking how little those who cover economics for the NYT actually know. Peter Orszag comes out looking awful -- caring about the short-term budget deficit is actually counterproductive in a severe recession/liquidity trap. Summer's ability to get others to lie for him continues to be amazing -- the White House spokesman who said Summers didn't ask for a car when others have said he did. Summers looks to have been on the right side of the Auto bailouts, Goolsbee on the wrong side (which we already knew, but is still a bit troubling, as Goolsbee still has Obama's ear).

I'm still curious how the $900 billion that Summers & Romer thought were prudent got turned into just $825 in the ask to Congress. Annoying Baker still quotes the "$800 billion stimulus" when it was actually $700 net of the AMT patch. If political considerations were really why Summers & Romer went small on the stimulus, then why didn't they do it in patches (like, insist the AMT get done separately, or put a chunk of stimulus in the budget/health care)? Or make it conditional on the economic performance? And why did they pretend for the next year and a half that they had gotten the stimulus exactly right?

The answer is, of course, that Larry Summers cares about Larry Summers. Larry Summers is brilliant -- he doesn't make mistakes of this nature. Therefore, there was to be no altering of the stimulus once it was a done deal -- even once it was clear to all that the stimulus was too small. And especially since it was clear from day 1, that would have just wounded Summer's pride all that much more. Admitting a clear mistake on what was actually a conceptually simple issue would have demystified Summer's supposed brilliance, and so he had to hang on. And that's how the Democrats lost 61 seats.

I'm actually somewhat hopeful that Obama Economic Team II will be a touch better...
but step #1 would be to move heaven and earth to get Peter Diamond confirmed. I'm not getting that vibe from the WH...